Eurogreen Energy Disaster

DISASTER WAITING TO HAPPEN: EUROPE’S GREEN ENERGY CHAOS

Andrew MacKillop

The European Union is wracked by sovereign debt, budget deficits, monetary weakness, slow economic growth, trade deficits with the Emerging economies, an ageing population, and mass unemployment – but it has the supposedly proud role of world leader in Green Energy.

It is important to understand this massive energy transition programme, called the climate-energy package has never been tried outside war-time conditions, anywhere else in the world. The supposed and claimed reasons why this set of policies and programmes must be accepted, whatever the costs – which are extreme – feature the fear of Global Warming and the fear of high oil and gas prices and supply cutoffs. In fact the package is another, and maybe the last attempt by European federalists and Brussels bureaucrats, teamed with a few big energy corporation chiefs, to gouge more cash and kudos by driving up energy prices to save the planet from Global Warming disaster while ensuring supplies of secure, local produced, environmentally friendly energy.

To them, this is a pathbreaking and massively ambitious plan which everybody should approve. By massively reducing Europe’s dependance on fossil fuels and radically increasing dependance on renewable, unconventional and alternate “low carbon green” energy sources and systems, and heavily improving energy efficiency everybody will win. They say at the push of the Talk button.

Complaints and criticism are brushed aside with the claim that global warming, whatever the scientific reality of this supposed crisis, is dangerous and real. High priced and unsure supplies of imported oil and gas are presented as permanent, despite Europe’s huge reserves of shale and coalseam gas and large reserves of coal. Defenders of the policy package also claim “clean green” energy will bolster the economy and produce jobs, despite the results to date being unremittingly negative.

The costs of the policy package are already spiralling and in some countries, for example Spain, are a major part of the nation’s huge sovereign debt load. Stopping the European green energy juggernaut which can crush European finances and further impoverish average citizens – but is a gravy train for a few green grabbers like Sir Richard Branson – is now an urgent priority for citizen action.

HIGH LEVEL PLAYACTING

At a higher level, the formulation of Europe’s climate-energy package, which was voted by the European parliament in December 2008 and enacted by all 27 member states in June 2009, can be traced to the interplay of major geopolitical factors. These include the Kyoto Treaty, G20, G8 and G7 meetings, and the European Union’s own program of federalist and integrative treaties, most recently the Amsterdam and Nice treaties. The common thread of all these actions which supposedly can improve energy supply security, raise the competitiveness of the energy economy, and promote economic growth and job creation – and of course mitigate global warming – are that they are totally undemocratic. All of these treaties, actions and binding agreements were made behind closed doors, with all that means and implies.

The reduction of CO2 emissions set by the European climate energy package has targets as high as an 80% reduction, from various baseline years (notably 1990 and 2005), by about 2030 or 2035. Near term targets include a 20% to 30% cut in CO2 emissions by 2020. Most people do not know what that means – but are now finding out.

The goal of cutting and substituing fossil energy consumption by similar amounts, say 80% by around 2030, has and will have straight price and tax mechanism effects: energy prices will rise because of the package, despite all pretence and claims to the contrary by defenders of this juggernaut policy package. Both electricity and gas prices are likely to rise as much as 33% by 2015, to achieve the claimed goal of making alternate and renewable energy sources and systems the de facto sole solutions for supplying future energy in Europe.

Other targets of the plan, especially the reduction by 20% in 8 years (by 2020) of how much primary energy is consumerd for each unit of final delivered energy, and a reduction in Europe’s total energy consumption by 5% relative to 1990 levels will most surely be used to justify higher energy prices and even possible rationing of energy and banning of “unclean” high carbon energy through measures like banning non-electric cars in city centres by as early as 2012-2014. If you do not buy a 35 000 euro all electric car, you dont drive to work. If you do buy one, we give you 7 000 euro of government cash.

Today in late 2011 major political parties in Europe, including governing parties are getting a grip on how unpopular this plan really is, and are beginning to distance themselves from the ‘carbon neutral and climate correct’ policy package. This is due to rising opposition from the public, trades unions, corporations and companies, citizen associations and political party analysts. Every 1% rise in energy prices drives around 100 000 more people into fuel poverty, in Europe’s five-largest countries.

The current climate-energy package is too ambitious, too expensive, too complex and above all does not seem able to attain any of its published goals despite the rising forest of gaunt windmills and constant anti CO2 propaganda on state and private mass media.

CO2 HYSTERIA

The ‘high ground goal’ of the plan, apart from subsituting and replacing oil and gas (with coal never mentioned despite the fact that European coal consumption is rising – because it is cheap), is reducing Europe’s CO2 and other greenhouse gas emissions. The target is a cut of at least 20% relative to 1990 output levels by 2020. The European Council has even approved proposals from the equally undemocratic and unelected European Commission for a higher target cut of 30%. These massive cuts, compressed into the 8 years remaining to achieve them can only be achieved by heavy legislative and energy taxation measures.

Depending on data sources and methods of comparing data, the EU27 countries have in fact only significantly cut CO2 emissions on a year-by-year basis during sharp economic downturns, most recently in 2008-2010. During periods of growth, most recently 2004-2007, EU27 emissions increased with economic growth and employment, because the economy used more energy, and because 81% of European energy in 2010 was still fossil based. Forcing very high cuts in CO2 emissions can certainly be called recession-friendly, big government-friendly and hostile to jobs.

The question of whether CO2 (and other so-called greenhouse gases) are the main causes of Globsl Warming, and in turn the key question of whether Global Warming is real, and the scientific reality or not of global warming are all totally ignored by European Commission energy czars. They believe, even if you and Nobel prizewinning physicist Ivar Giaever don’t. No discussion is permitted.

Methods for monetizing and marketizing CO2 emissions permits and credits, which started in 2005, are now vastly complex and very difficult to understand by average persons. More important, they have no effect at all on actual CO2 emissions by the European Union. Emissions rise when economic growth increases and unemployment diminishes – and vice versa – as simple facts and figures for the 2005-2011 period will show anybody who wants to know. The time is long gone when cutting CO2 outputs was presented as a sort of popular crusade and life quest, because less and less people believe.

At the time, about 2006-2009, large turnover value for emissions trading was often presented as an additional reason why the public should approve European efforts to cut emissions through allocating permits to emit CO2 (and other GHG) and mandating the trading of these permits and allocations to emit CO2. Some figures advanced by defenders and promoters of “carbon finance and trading” in that period went as high as hoping for annual turnover value of perhaps 80 billion euro if the price for the right to emit a ton of CO2 could be raised to 40 euro, and 2 billion tons of CO2 permits were traded.

European energy czars have added ever more complex tradable instruments to the CO2 soup, such as Clean Development Mechanism credits, for promoting green energy and cutting CO2 emissions in non-European developing countries, and carbon offsets, that is tradable paper based on emitting CO2 somewhere outside Europe, by or for a European company, but treating this as a reduction of emissions inside Europe. Other ingenious “carbon finance” assets and negotiable securities have been added by way of so-called financial engineering, through derived and related financial products, in an open and permanent invitation to the finance industry, investment funds and traders to play with Carbon Finance.

Abuse, fraud and theft have necessarily grown as the so-called “carbon trading spce”has been levered up but on the ground, the claimed objective of cutting CO2 emissions, whenever it does happen, is obtained by outplacement, delocalisation and deindustrialisation, economic recession and rising unemployment.

BUNDLING AND UNBUNDLING YOUR POWER BILL

The CO2 circus and gravy train for financial engineers was not enough. More and equally complex, equally ineffective measures are bundled together by the climate-energy package, with a consant stream of European Commission directives, issued on a regular basis. The aim is to create a pan-European electricity and gas trading market, similar to CO2 trading arrangements and markets.

The keyword “unbundling” is shorthand for so-called energy market liberalization, which really means the encouragement of energy trading and the break-up of state energy monopolies, with their de facto and real world replacement by large or very large monopolist or monopolistic pan-European energy corporations, including large electric power, gas, oil, and energy sector industrial companies whose sole objective is “stakeholder value” that is revenue and profits growth.

As any European consumer of energy knows, from their fuel and energy bills, energy market liberalization, which has continued since about 1996, has done nothing to reduce energy prices – and has probably raised them above any increases due to higher prices set by energy producers.

The ideological basis of the energy-climate package, as for previous European Commission policy initiatives is pure schizophrenia: on one hand these initiatives are rigorously federalist, integrative and convergent, but on the other are rigidly free market oriented. The results “on the ground” are now well known by European citizens who see the policy package for what it is: an unholy alliance between remote Brussels bureaucrats and profit-gouging, subsidy-swilling private energy corporations.

Adding a layer of pure physical impossibility to the grandiose plan for a pan-European electric power market, the needed large scale and high power electric power grid interconnection and upgrading simply does not exist. The Commission, and the 34-member ENTSO-E, the electricity transport system operators organization, estimates that at least 40 000 kilometres of new high-tech power lines are needed – at costs as high as 10 million euro per kilometre – you have read that right. This does not exist, and is likely to never exist, but the fantasy of a total interconnected electric power trading system does.

For those who like the numbers they are simple. The EU’s total electric power capacity of today is about 805 GW. Its current electric power transport capacities are well below 20 GW, and few countries have capacities higher than about 3 GW for country-to-country exchanges. Germany, which has one the most highly developed set of power transport systems in the EU, only has 1 GW of power exchange capacity with the 4 Scandinavian counmtries of the Nord Pool, the biggest power exchange system in Europe, which at present is heavily used by Denmark as a sort of “back up battery” for its windpower system, often constrained to export as much as 60% of wind-source electricity production out of Denmark when national demand is low but the wind is blowing.

Germany’s power transport capacities for exchanges with Nord Pool are 1 GW. This is one seventh of one percent of EU27 electric power capacities !

Outside Europe, the effective total collapse of voluntary CO2 emissions trading in the USA and the shutdown of its only carbon trading exchange, Chicago’s CCX, formally in January 2011 but effectively since November 2010, with day traded CO2 prices falling to 5 US cents per ton, have underlined the complete loss of US investor confidence in emissions trading. At launch of the CCX in 2003, bright spirits forecast this market could or might at some stage attain a turnover value of 50 billion to 10 trillion US dollars per year. All other major world powers, such as China, India or Russia have however refused to promote or mandate CO2 emissions trading, which only serves to underline the fragility of carbon trading as a global, viable administrative initiative and sustainable financial activity.

POLITICAL BLOWBACK

Upstream energy, climate and environment policy, in Europe today, of course stays officially committed to low carbon, but this is confronted by a rising number of major challenges. Very recent examples of this include the ruling UK Conservative’s annual conference in Manchester (October 2011) at which commitment to “carbon neutral and climate correct” was notably diluted by major speakers including the prime minister.

Just as important, the global trade context is clear: no rival or partner of the European Union applies “carbon correct” policies and in particular does not enforce the trading of CO2 emissions permits allocated by governments. In reality, so-called “carbon trading” is an effective energy tax which the EU will certainly not be able to impose through trade sanctions and tariff barriers on “high carbon” trade goods or services exported to Europe from outside the Union. If it does, this will firstly result in WTO proceedings which Europe will almost certainly lose, but may also cause retaliatory action with an adverse impact on world trade at a very difficult time for the European economy, which has very large trade deficits with China, and growing deficits with India and Brazil, which are all hostile to the basic notions and rationale of “carbon trading”.

For energy regulators and traders, “unbundling” has for several years been the leitmotif of European Commission attempts at creating a so-called continental energy space for electricity and gas trading, along with CO2 emissions trading. For electricity and gas in Europe, “unbundling” or the removal of certain national regulations decided by democratically elected governments, and the imposition of new Commission initiated European-only regulations, decided by bureaucrats and their corporate energy chief partners, has certainly not reduced energy prices – as any European consumer will agree. For electricity in particular, the results threaten to become anarchic, as well as very costly for consumers leading to rising opposition by ruling parties in countries as widespread as Poland and Portugal.

The rationale that increased competition between electricity producers due to “unbundling” and the creation of a pan-European electricity market will cut prices, but this notion is confronted by hard evidence this is not the case. When we check the effects of combining “unbundling” with fast rising amounts of windpower and solar electric power we find the result is clear: electricity prices rise fast. For as long as the so-called pan-European electricity market is claimed to possible, and vast spending on new power grids are needed right across the 4.3 million square kilometres of the EU27, high electricity prices are the only read out.

END OF THE ROAD FOR EUROPE’S GREEN ENERGY FANTASY

The pan-European electricity trading space – which is physically impossible because its costs would be out of sight – is a typical example of the fantasy underlying this unworkable policy package. The notion that electric power producers in Romania can somehow compete with suppliers in Portugal or Ireland or Belgium is transparent nonsense because it is physically impossible.

This of course is rarely if ever admitted. So-called “unbundling” will therefore stay national, in those countries governed by politicians who ignore their voters, and we can be sure that electricity trading at local and national scale can only, and will raise the price of electricity and drive more people into fuel poverty. This is because the proven behaviour or “instinct” of traders is to profit from any shortage that may exist, or can be engineered, and use this as a pretext for gouging power prices to extreme highs, with an equally predictable crash of day traded prices afterwards.

At a time of severe economic difficulty and permanent crisis for sovereign national debt financing in an increasing number of European countries the real world effects of the climate-energy package – higher energy prices, massive state handouts to a few chosen high tech energy corporations, increasing control by the European Commission and federal European entities of the energy sector – do not include significant job creation.

Although rarely mentioned in Commission documents, communications and publicity on the climate-energy package, the notion that high tech or very high tech “green” energy can create and sustain large numbers of new jobs is often added by supporters of the package and those who profit from it as an additional reason for the public to approve it. This is totally disproved by reality. Low carbon electricity in Europe, as elsewhere primarily means windpower, some solar electric power, and small servings of extremely expensive geothermal power, as well as semi-experimental and tiny alternate and renewable supply sources and systems, including run-of-river or low head hydropower, and wavepower. All of these technologies and systems are capital intensive and generate few jobs. In addition, notably in windpower and solar power, European producers are exposed to rising competition from China and India, and Europe’s “green tech” industries are quick to shed their few employees when market conditions sour or government subsidies dry up.

Taking the case of windpower, its total installed capacity in Europe attained about 90 GW in early 2011, some 45% of world total windpower capacity – but this only generates a total of about 105 000 direct jobs in Europe. This is about 0.025% of the continent’s economically active population of 230 million persons and about 0.47% of Europe’s unemployed population as of August 2011. Employment in all other “clean energy” sectors in Europe is of course even lower than in windpower.

When we turn to spending needs, however, things are completely different and set at the other extreme end of the scale. The upper limits for needed spending are nearly impossible to set, like the almost zero lower limit for “clean green” jobs that the climate-energy package could or might produce, if the subsidies keep on coming. The main pillar of the EU’s electric power programme is windpower and solar electric power, with as much as 67% of all electric power spending in Europe to 2030 (some 540 billion euro on a total amount presently estimated at around 900 billion euro) supposedly going only to these two sources and systems. Adding power grid spending, and a possible attempt to force the mass utilisation of electric cars, total spending needs for the policy package – even in th 8 years to 2020 – could or might exceed 1000 billion euro. There is no way this spending can be achieved.

FREEWHEELING TO FAILURE

Today’s political, public opinion and policy context for the climate-energy package is of policy drift to nowhere with fast rising criticism, fed by the many glaring examples of the package’s complexity, incoherence and lack of realism, and above all its nearly open-ended spending requirements.

This “frozen dynamic” may explain the market and trading tropism that has replaced rational energy strategy debate and discussion, and is also shown by the obsessional attention which the European Commission gives to regulatory and trading arrangements for electricity, for a future pan-European electricity market which at present is physically impossible !

The easily demonstrated cost and technology barriers to large scale power transport explains why Europe-wide electric power transport system integration does not exist. Other programmes in the climate-energy package also clearly exhibit this fatal failure, due to resource, science, technology and industrial production limits on scaling up or “ramping up” alternate low carbon power sources in Europe. These are now impossible to ignore and must be honestly and openly debated, despite this being a “reality shock” for European energy policy makers and their few friends in the large private energy corporations poised to massively profit from the energy-climate package.

The negative results of Europe’s unsustainable and chaotic green energy policy and programmes are now accelerating. They include the downsizing or abandonment of outline plans for biofuels production in Europe (especially food crop based bioethanol), reduced plans for massive offshore windfarm development, lowered plans for large scale European electricity grid development and interconnection, and delays or abandonment of so-called “smart” grid plans and projects – and even of plans for lower cost but economically unsure strategies, like “smart” metering across wide area power market areas. It is very likely this trend will accelerate, not only because of costs and technical dysfunctionality, but because of basic political and public opposition.

While Europe’s remaining proven oil resources, of about 15-35 billion barrels, are tiny relative to Europe’s oil consumption of 5.2 billion barrels in 2010, the reserve-to-consumption ratio is not in any worse than similar ratios for the USA, China, India, Japan and other big importers. Conversely Europe has about 120 billion tons of remaining coal reserves (about 600 billion barrels oil equivalent) and initial studies of Europe’s coalseam and shale gas resources by the IEA and EIA suggest these stand at about 200 billion barrels oil equivalent. Gas is an easy, effective and cheap replacement energy source for road and off-road transport vehicles – which presently take about a half of total EU27 oil consumption – and this is the real solution for Europe’s oil fear.

PROGRAMME SPENDING HIGHLIGHTS

EUROPEAN UNION 2030-2035 targets

(1) Subsidy payments by government only. Current car fleet of EU is 225 million units.

Rate of 7000 euro per Leaf-type all electric car as proposed in France and Germany.

(2) Based on ENTSO-E TYPD (ten year development plan) and cost average of 10 – 12.5 million euro per kilometre for underground and undersea grid links, and “smart” grid upgrades to rest of network

(3) Offshore windfarms at capital cost of 6000 euro per kilowatt installed

(4) Solar PV power plants at capital cost of 15000 euro per kilowatt installed.

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