Several days ago, I wrote a blog regarding Russia's natural gas deal with China. That deal will alter Western Europe's energy policies, which are only now being contemplated. Western Europe's movement to green energy is commendable, however, contingency plans must be place should an unforeseen energy event transpire. Referring to my blog of earlier in the week, Germany produces 44% of their electricity from coal, 14% from natural gas, 18% from nuclear power, 8% from wind and 16% from other. While they want their energy to be clean, but are endowed with coal and natural gas, what happens if their energy plan goes awry?
Nuclear power was gathering steam (sorry!), countries were beginning to rethink nuclear power given its safety record. Numerous new reactors were on the construction books. Then an earthquake and tidal wave severely damaged Fukushima, reversing the nuclear plans around the world. Fukushima made such an impact on Germany, that they altered their energy policy. Prior to Fukushima, Germany produced about 20% of its electricity via nuclear. Subsequently, they immediately shut down 50% of their capacity by years end and increased their importation of electricity from France (80% nuclear powered); thereby placing a larger reliance on France for electricity.
Because much of Western Europe has reserves and resources of coal, coal has been used for decades. With Russia's growth in energy exploration and production over the same decades, Western Europe was able to gradually reduce its use of coal in favor of natural gas, which Russia was happy to supply. However, Crimea marked the second large change to Germany's and Western Europe's energy policy. Much of Western Europe's natural gas needs have come through Ukraine and Belarus and two pipelines directly from Russia to Poland (Germany imports about 90% of its natural gas). Russia has twice ceased transporting natural gas from Russia through Ukraine to Western Europe over the past 6 years, over "taxes owed." With Russia's brokering of a new natural gas deal with China, Germany and Western Europe's reliance on Russia for natural gas is in jeopardy, forcing Germany and Western Europe to rethink their energy policies. The big problem with natural gas is that not only is it used for electricity generation, but more importantly, it is used for heating Europe. This is problematic.
That brings me to the change in Germany's energy policy and why moving to green energy needs to move with technological advances and not through mandates. Here is a perfect example. After several years of barring the oil and gas industry from drilling for natural gas through hydraulic fracturing, Chancellor Merkel is preparing a framework that would let energy companies extract oil and natural gas by hydraulic fracturing. This is quite an energy policy shift. Germany's Federal Natural Resources Agency has estimated that Germany has 2.3 trillion cubic meter, or 81 trillion cubic feet, of shale gas resources. Forming and setting an appropriate extraction policy is a wise move. Other countries with shale gas should rethink their policies. The UK is ahead of Germany on the exploration of shale gas, because their North Sea output has been declining for years and they are looking for a replacement. At the end of the day, when people can't logon to their PCs and cell phones because of electricity shortages, or worse they can't keep warm, then they will scream the loudest for changes to their country's energy policy.
So what started out as being a green energy strategy has been disrupted by global politics. The rest of Europe would be wise in following Germany's path of energy diversification of all kinds. Each country will have a different plan given its geological make up and consumer conservation should be a big part of that.
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