By Dave Wilkin
Affordable energy sits at the very foundation of modern economies, underpinning the lifestyle we enjoy today.
The past quarter-century has seen rapidly rising energy and fossil fuel consumption as billions of people have risen out of energy poverty and into middle-class and above lifestyles. This is positive, but it came at the price of steadily rising emissions with increasingly concerning consequences. Time is now running down for the enormous structural changes that will be needed if the world is to reach the ambitious emissions targets being set.
Unfortunately, the energy transformation choices, costs, and implications are poorly understood by most people. The picture has become more clouded by academics and politicians who mostly don’t have experience working in the energy industry and thus lack firsthand knowledge, or they have other interests. A climate-emergency narrative pushed consistently by the media is drowning out other voices and obscuring a fuller understanding of the energy transition big picture.
Rhetoric aside, the key question remains: what transition path will countries choose? Too slow a global transition to clean energy means increasing emissions and rising demand for more coal and more costly unconventional oil and gas to meet steadily growing energy demand. Too rapid a transition by prematurely curtailing fossil fuels before affordable viable alternatives are in place will lead to severe economic damage while condemning billions of people to continuing energy poverty, meaning a world less fair and geopolitically less stable. The ideal path chosen should achieve a balance and be sustainable, thus real-world trade-offs are needed. The ramifications of choosing poorly are enormous, carrying the highest possible stakes.
A major early warning of the impacts of imbalance is now playing out in Europe, the world’s champion for rapid energy transition. A significant energy crisis is unfolding there as natural gas and coal prices have spiked over 400 per cent, pushing electricity prices far higher and fueling consumer price increases not seen since 2008. With winter fast approaching and fossil fuel storage levels at unusual lows, the crisis is expected to worsen, bringing further economic disruption to recovering economies and hardship to many more families and businesses.
It’s not just confined to Europe either. Many other countries, most notably China and India, are also feeling the impacts of fossil fuel supply shortages and spiking energy prices, causing roaming power blackouts as systemic supply-demand imbalances take hold.
Inappropriate government energy policy, environmental activism, and ESG investor pressures have all taken their toll by reducing needed fossil fuel investments necessary to maintain adequate supply in the face of rising demand.
Europe’s energy crisis is the biggest wake-up call yet on the consequences of poor energy transition planning. Europe has been closing down coal, gas, oil and even nuclear power generation for well over a decade, replacing it mostly with intermittent wind and solar power while simultaneously becoming more dependent on Russian natural gas. The past cold winter lowered fuel inventories, and a less windy and dry summer significantly reduced renewable power generation, placing further demands on fossil fuels. It’s surprising to see such stunningly poor energy planning from some of the wealthiest and most technically advanced countries in the world. For other nations watching, Europe’s attempt at a rapid transition is not the model to follow.
Yet, even in the face of this crisis, EU politicians and even the International Energy Agency are predictably calling for a faster transition led by much more wind and solar power. This crisis was not only foreseeable but inevitable, as most climate and energy policies have long been designed to drive fossil fuel prices higher. The obvious problem of course is the real hardship caused when sufficient, dependable alternatives aren’t in place. Note that EU power grid average share for wind plus solar is 18 per cent, and fossil fuels are about 40 per cent share (three-quarters of all primary energy). Recently California and Texas, both with wind/solar shares similar to Europe, also experienced significant power grid stresses and rolling blackouts.
As the consequences of poor planning and flawed policies bite hard, the 26th UN Climate Change Conference (COP26) in Glasgow (UK) should be interesting to watch to see what is learned from the crisis and what changes may follow. My guess is most western country leaders attending will ignore the obvious and justify an even faster transition away from fossil fuels. There are some clear signs of dissent though. Norway, Europe’s largest oil and gas producer, is planning to grow their oil and gas industry. In the US, President Biden’s aggressive climate agenda looks in jeopardy as US energy prices spike and resistance builds. Further, China’s President Xi Jinping and India’s PM Narendra Modi remain uncertain to attend and Russia’s president Vladimir Putin will not attend. Combined, these countries generate over 55 per cent of global energy related CO2 emissions. A disappointment to many, no doubt.
Canadians need to understand the unvarnished truth on the energy choices ahead, the costs involved, the limitations and ramifications if we are to successfully navigate the turbulent waters and to seize the real opportunities presented. Current Canadian federal government climate and energy policy has us moving down a similar path as Europe, but at a far higher cost. Prematurely rapidly shuttering our large oil and gas sector would be an unprecedented self-inflicted catastrophe.
My next article in this energy mini-series takes a closer look at the global energy big picture to better understand what lies ahead. Watch for it!
Dave Wilkin is a Professional Engineer, with a master’s degree in Electrical Engineering from the University of Toronto. His career spans 45 years in IT, banking, energy and consulting. He lives in Huntsville, Ontario.
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