The Wall Street Journal recently pointed out an uncomfortable truth for the keep-it-in-the-ground crowd: Germany avoided energy shortfalls over the past year by turning to coal. In fact, for the second year running, coal use in Germany has grown. Coal now provides a full third of the nation’s power as use of natural gas has fallen in response to soaring prices with Europe racing to ditch Russian energy. While renewable deployment has accelerated, coal is the reliability bulwark during peak power demand.
Germany’s pragmatic reembrace of coal as an energy security backstop is far from over. While it may seem that the worst of the global energy crisis is behind us with European natural gas prices retreating from their eye-watering peaks, Bloomberg’s Javier Blas observed that’s the glass half-full view. The glass half-empty view is that gas prices remain double their pre-crisis levels.
European consumers and European industry are still very much struggling under the weight of crushing energy costs. For example, the U.K’s short-term electricity prices remain three times their average from 2010-2020. In Germany, energy-intensive industries – such as the chemical industry – are closing plants and cutting jobs. “Europe’s competitiveness is increasingly suffering,” said BASF boss Martin Brudermüller.
Will the Luck Run Out?
Don’t be shocked if Germany – and Europe – use far more coal next year, not less. So much of the reason that Europe navigated this winter without rolling blackouts and energy rationing came down to dumb luck and some unexpected and unintentional help from China. The International Energy Agency estimates that a full third of reduced gas use came from mild weather. And LNG was plentiful thanks to China’s ongoing COVID lockdowns that are now over. The situation could easily have been far worse, and Europe prepared for it.
In addition to leaning on its remaining coal fleet, Europe brought 26 shuttered coal plants back online in anticipation of peak energy demand far outpacing available gas supplies or the cooperation of renewable energy. There were cold, gray and windless days that saw coal generation meet nearly half of Germany’s power demand. If things had broken differently, and a series of cold snaps had turned into a bitterly cold winter, Europe’s coal backstop would likely have been making headlines. It may yet.
Coal stockpiles across Europe have surged and European buyers remain active. The overlooked security of months of fuel sitting on site is now once again a reassuring fail safe should the good luck run out. It’s also possible European energy consumers simply cry uncle and demand further action to moderate energy prices. Using more coal to shield industry and homeowners from the gas market is a lever well within reach. Ongoing deindustrialization of Europe’s economy may well force policymakers’ hands.
Europe made a grave mistake sacrificing its own dispatchable fuel diversity and energy security in largely pushing coal off its grid and embracing a notoriously volatile gas market dominated by Russia. Europe has relearned the importance of energy security and the pain in doing so is nothing if not a teachable moment.
Yet, the U.S. – despite our own regional energy crises and growing warnings about the pace of forced coal plants retirements – is doing its very best to learn nothing from Europe’s missteps. In fact, with the U.S. Environmental Protection Agency now dictating energy policy, every sign points to the U.S. following the same dangerous path.
0 Commentaires