Lessons from the energy crisis: Why the transition to clean energy must be faster

Photo-illustration: Pixabay

The drastic rise in electricity and gas prices heralded a winter of discontent and anxiety in Europe. What caused this energy shock, will we freeze because of possible shortages or because of bills, are these all political games and what does the energy crisis mean for the fight against climate change?

These are some of the burning issues that the world is currently facing, and they are especially topical at the time of the 26th United Nations Conference on Climate Change (COP26) in Glasgow.

The growth of energy prices was influenced by several factors at the same time – what analysts call a “perfect storm”. The cold last winter in Europe depleted gas supplies, while in Asia the extraordinarily warm summer increased the use of air conditioners. Demand for gas, meanwhile, has risen due to overcoming pandemic restrictions, primarily in Asia, but also in the EU due to the shutdown of coal-fired power plants. There were fewer winds in Europe and less rainfall in China, and there is a suspicion of various geopolitical games. Russia has been accused of slowing gas supplies to Europe in order to obtain a permit for the Nord Stream 2 gas pipeline, while Russian officials blame market speculators for the price jump. Proponents of green energy also believe that insufficient investment in renewables is a problem, as it is mistakenly believed that the transition must be gradual.

One of the points of contention is the extent to which the growth of the price of electricity is influenced by the growth of costs of CO2 emission units, which are paid in the EU by greenhouse gas emitters, within the Emission Trading System (ETS). It is a mechanism that the EU uses to remove fossil fuels from energy in the energy transition, and this year the price of a ton of emitted CO2 exceeded 50 euros. Frans Timermans, the commissioner for climate action, said that the jump in the price of emission units makes a “very small” part of the jump in the price of electricity, rejecting the calls for the EU to intervene in the carbon dioxide market.

Photo-illustration: Pixabay

Whatever the leading cause, gas has risen in price by 250 percent since January, and consequently electricity prices. At the beginning of October, the price of electricity on European stock exchanges increased from about 180 euros per megawatt-hour (MWh) to more than 320 euros. At the same time, Gas broke the record of 1,900 dollars per thousand cubic meters.

Expensive electricity and gas deepen the “climate crossroads”

In an otherwise divided world, the “climate crossroads” has deepened further – while some interpret the energy shock as evidence that the green transition has entered too quickly, others believe that the lesson is just the opposite and that the transition to renewables should be accelerated.

Some EU members are considering keeping oil and coal plants beyond the scheduled closing date, hitting EU policy, which last year produced more electricity for the first time from renewable elections than from fossil fuels (38 versus 37 percent). Elsewhere in the world, the authorities have resorted to fossil fuels, which is contrary to the long-term goals for decarbonisation and the UN Agenda 2030 for sustainable development. The seventh goal of sustainable development (COR 7) envisages that by the end of 2030, the share of renewable energy in the global energy mix will increase significantly from the current 17 percent. Without a faster transition to renewable energy sources, climate conservation as the 13th goal of sustainable development cannot be met. It calls for urgent action against climate change and its consequences for the environment and human health.

The energy crisis has strengthened electricity, which claims that fossil fuels have no alternative, while on the other hand, it has caused fears that the EU Green Agreement will lose support. Hungarian Prime Minister Viktor Orbán blames “Brussels bureaucrats” for the constant rise in energy prices obtained from fossil fuels, criticizing, together with Poland, the EU’s fight against climate change. European Commissioner for Energy Kadri Simson emphasizes that the rise in energy prices has little to do with EU climate policy, but, on the contrary, with the bloc’s dependence on fossil fuels and their volatile prices.

The President of the European Commission, Ursula von der Layen, announced that the creation of electricity prices will be examined, and that the possibility of separating gas and electricity prices within the market will be considered, since there are much cheaper energy sources from renewable sources. The effects of the increase on citizens and the EU economy will be mitigated by a series of measures, including helping poor households from ETS revenues and reducing energy taxes.

Without investing in clean energy, there is a risk of new turbulence in the energy market

Photo illustration: Unsplash (Kenny Luo)

Ahead of the COP in Glasgow, the International Energy Agency (IEA) told governments that, given the instability in the energy market, rising emissions and the frequency of climate catastrophes, Scotland should commit to clear actions and ambitions.

The IEA states in its annual report that progress towards clean energy is still too slow for emissions to start falling significantly. Namely, in order to reduce emissions to a net zero value by 2050, which is the only scenario for curbing the growth of global temperature to 1.5 degrees Celsius, it is necessary to more than triple investments in clean energy projects in the next 10 years. About 70 percent of investments should be made in emerging and developing economies, where there is a lack of money, and capital is up to seven times more expensive than in developed economies. The lack of investment carries the risk of new turbulence in the global energy market, the IEA report states.

At the same time, the investments will represent a great development opportunity. It is estimated that the market value of wind turbines, solar panels and lithium-ion batteries will exceed the value of one trillion dollars per year by 2050, comparable to the current oil market, with 26 million new “green” jobs.

Is there a winter for Serbia?

Although we have almost the cheapest electricity in Europe and favorable gas contracts with Russia, the consequences of the energy crisis can hardly completely bypass Serbia. The economy is the first to be hit. After a 20 to 50 percent increase in electricity prices in June, suppliers announced a new price jump of 70 to 135 percent for companies from Serbia and Bosnia and Herzegovina in early October, which could result in a drop in production and layoffs or higher prices of goods and services.

Photo illustration: Unsplash (Dan Meyers)

By signing the Sofia Declaration on a Green Agenda for the Western Balkans in November 2020, Serbia, along with other countries in the region, has committed to a number of concrete actions, including the introduction of CO2 taxes and market models to boost renewable energy, and the phasing out of coal subsidies. . A year later, the EU confirmed that the countries of the region will receive 9 billion euros in grants and 20 billion euros in investments to fulfill their obligation to put sustainable development, resource saving and climate action at the center of economic activities.

There is a fear in Serbia that the transition to clean energy will bring higher bills for consumers and lower energy security. The Minister of Mining and Energy, Zorana Mihajlović, said that despite the constant resistance that exists, the state will “take the reins into its own hands” and create a framework in which the energy transition will take place. She added that an energy mix must be made that will guarantee both energy security and environmental protection, so that the most modern thermal power plants such as Kostolac B3 may remain operating as a kind of reserve.

The energy transition will affect many sectors. As announced, the largest exporters from Serbia will face a tax on CO2 emissions as early as 2026. Despite having a strategic and legislative framework covering COR 7, Serbia has not made much progress in the field of renewable energy. In the agreement with the Energy Community, there was a goal to reach the share of renewable energy sources of 27% in the final energy consumption by 2020, and as it was not fulfilled, its realization was postponed.

Most of the electricity in Serbia still comes from fossil fuels, primarily coal (almost 70 percent), while the rest of the electricity comes mainly from large hydropower plants. Inefficiency, technological obsolescence and low quality of available coal contribute to high emissions of polluting particles that endanger health. It is also necessary to significantly improve energy efficiency, because we are worse than the global average in this respect.

The drafting of this document was made possible by the governments of Switzerland and Germany. This document does not necessarily represent the official position of the governments of Switzerland and Germany, as well as GIZ.

Izvor: Executive Group

Source: Energetski portal Srbije by www.energetskiportal.rs.

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