Gerard Reidco-founder of the company finance advisory Alexa Capital, wonders if the EU is as much as the duty of coping with the dual threats of the vitality disaster and to tug a revitalized US clear electrical energy trade.
From pv journal 03/23
The excellent news is that winter is behind us in Europe and there aren’t any blackouts or emergency rationing of pure gasoline and different fuels. The dangerous information is that Europe has many challenges forward, beginning with costlier vitality, poor positioning in key vitality applied sciences, and the rising risk to European trade from the US Inflation Discount Act (IRA).
Collectively, these components threaten to undermine Europe’s competitiveness and dwelling requirements. To fight these dangers, Europe should reply quickly with a long-term, built-in technique.
Again in August of 2022, as the costs of electrical energy, coal, diesel, and pure gasoline hit all-time highs, it was unclear whether or not Europe would get by means of the winter with out main injury to its financial system. Vitality customers reacted to excessive costs by lowering demand and by switching from pure gasoline to alternate options similar to coal, wooden, and oil; avoiding a part of the financial impression.
The climate gods are sort too. Europe had a heat winter, together with report temperatures in December and January in lots of areas. France can be doing a very good job, contemplating that in August greater than half of its nuclear reactors have been down for repairs and are usually not anticipated to come back again on-line in time for the winter months. That may trigger an important threat of blackouts. Nonetheless, at first of January, nearly three-quarters of France’s nuclear fleet was operational.
The extent of pure gasoline storage throughout Europe could be very excessive immediately due to the diminished demand for gas and the aggressive buy of liquefied pure gasoline (LNG) below the mandate from the European Fee. Add the truth that Germany and Finland are actually opening some floating storage and regasification items and – within the worst case situation – Europe can do with none Russian gasoline, going ahead.
Regardless of these successes, the continent nonetheless faces excessive gasoline costs sooner or later in addition to elevated electrical energy worth volatility and dangers. The alternative of low-cost Russian pipeline gasoline with costlier LNG means European shoppers will face greater costs within the coming months. The silver lining is that clients can be pressured to change into extra environment friendly and change to cleaner alternate options similar to warmth pumps.
Coping with gasoline costs that stay greater than ever might trigger competitors issues for heavy European trade, nonetheless. So as to add to those considerations, US President Joe Biden’s IRA incentives will scale back electrical energy prices for US electrical energy patrons, growing the nation’s vitality price benefit. The IRA additionally encourages home manufacturing of key decarbonization applied sciences, similar to batteries and photo voltaic panels, and it’ll assist the US re-industrialize round these key applied sciences for future progress.
In the meantime, again in Europe, there isn’t a one producing lithium-ion batteries or photo voltaic panels within the high 10 worldwide, and the normal wind trade led by Europe has been destroyed, with massive, billion-euro lack of trade leaders Vestas and Siemens -Gamesa. This raises the query: What needs to be carried out concerning the state of affairs?
What to not do is fairly apparent. Most significantly, procrastination and infinite dialogue should be prevented as a result of each day delayed selections scale back Europe’s means to regain competitiveness and even equality. The second situation that should be prevented is European nations making an attempt to go it alone as a result of the size of the problem can solely be met with joint and unified European efforts. The European Union should subsequently be keen to collectively put money into its personal future by funding R&D and new infrastructure and by taking extra dangers.
Corporations such because the Swedish electrical car battery champion Northvolt present an instance of success the place European non-public and public efforts are mixed to rapidly scale up new manufacturing amenities. To compete with China, which has proven itself to be higher at increasing manufacturing amenities than Europe, there should be a joint effort led by the governments of EU member states similar to Germany and Italy, in addition to European Fee, to encourage and guarantee quicker coverage alignment in all member nations. Coordination and reaching consensus at a quick tempo has all the time been a sore level for the EU. That is essentially the most tough objective to realize, as a result of it requires compromise from massive and small nations, wealthy and never so wealthy.
To succeed, European nations should decide to the vitality transition and an open dialogue with all residents. Member states also needs to play a extra energetic function in worldwide affairs, particularly round major uncooked supplies and vitality fuels. The large query is whether or not it may be carried out in Europe. The reply is sure and by doing so, Europe won’t solely break its habit to fossil fuels but in addition assist create jobs and financial improvement in future-oriented clear industries.
In regards to the creator: Gerard Reid a co-founder and accomplice at Alexa Capital. He has spent greater than 20 years working in funding banking, in fairness analysis, fund administration, and company finance, with a deal with the vitality transition and the digital vitality revolution. Earlier than founding Alexa Capital, he was the MD and head of European cleantech analysis at Jefferies & Co.
The views and opinions expressed on this article are these of the creator, and don’t essentially mirror these held by pv journal.
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