Europe's energy transition timeframe is starting to take shape, as countries take concrete steps to secure energy supply in the aftermath of Russia's invasion of Ukraine and consequent pledges to stop the import of Russian hydrocarbons.
The EU is sharply focused on renewables in the medium and long term — with €113bn ($121bn) laid out for their development — but energy security remains at the top of the agenda in the immediate short-term. "The energy system is in absolute distress at the moment," Andy Brown, chief executive of Portugal's Galp, said at the World Economic Forum (WEF) 2022 last month. Although the EU has agreed a mandatory gas storage level of 80pc by 1 November, the coming winter is likely to see increased coal burning for power generation in many European countries.
The UK government has asked UK utility Drax and French utility EdF to consider running their UK coal assets past their scheduled September closures, both firms confirmed to Argus. UK energy minister Kwasi Kwarteng says that coal plants could be an interim solution, but stresses that the UK remains commited to closing all coal-fired generation in September 2024.
Germany, traditionally more heavily reliant on coal and lignite-fired power generation, is following suit. Germany is "ideally" aiming to phase out coal-fired generation by 2030, but its government has prepared legislation to boost power generation capacity this winter and allow coal and lignite-fired plants to operate beyond their agreed closure dates.
But Europe's long-term climate goals remain firmly in place, not least because many in the industry think increased fossil fuel burning will be necessarily short-term, as there is unwillingness to invest in capacity that is likely to become a stranded asset. "Investing in a project with a 20-year outlook is kind of foolish," Brown said, adding that people are "nervous about investing in oil and gas".
Danish utility Orsted's chief executive Mads Nipper said he is "relatively convinced that the capital will keep flowing to the green sector". Given the crisis, "it is not wrong to keep some of the emitting assets running, but it would be a deadly sin to invest long term for new capacity, not only... from a climate perspective, from a pure business point of view, it's just insane", he said.
Foot off the gas
European Commission executive vice-president Frans Timmermans thinks that a rapid move away from Russian gas will speed the medium-term transition to green energy. Before the Ukraine invasion, the predominant idea was of "natural gas as a transitional energy carrier moving away from coal to renewables", he said. "Now that you don't want to import that from Russia... some countries might stick a bit longer to coal. But if you then can speed up the introduction of renewables exponentially, in terms of emissions you might still come out better."
But leaders in the European renewable energy industry warn that for that to happen, regulatory and permitting barriers that may slow the transition to renewables will have to come down first. "We need to widen the bottlenecks in order to get these projects up and running much faster," Swedish utility Vattenfall's chief executive Anna Borg told the WEF. "My main concern is the speed of the development… the demand is clearly there, right now my feeling is that the business community is moving faster than politics," she said. "The entire regulatory regime… needs to be broken down," Orsted's Nipper agreed.
The European Commission plans to tackle "slow and complex permitting" for renewable energy projects in its proposed REPowerEU plan to reduce its dependence on Russian energy. It hopes that member states may be able to reduce permitting timeframes from 7-8 years to just one year, Timmermans said.
