Energy Security. Can Europe turn a problem into an opportunity?

Energy - April 21, 2023

Energy is a vital commodity for modern society, powering homes, businesses, and transportation. In Europe, the energy situation is complex and multi-faceted, with a variety of factors affecting the availability, affordability, and sustainability of energy sources. The current state of war between Russia and Ukraine has brought Europe’s energy problem once again into focus. To make things clear, the situation is not new it just became more urgent over the past year.

Europe is a diverse continent, with a wide range of energy resources and consumption patterns. According to the European Commission, the region’s primary energy consumption in 2019 was approximately 1,580 million tonnes of oil equivalent (Mtoe), with petroleum and natural gas being the two most significant sources of energy, accounting for 34% and 23% of total consumption, respectively. Coal and renewable sources, such as hydroelectric, wind, and solar, made up 15% and 12% of consumption, respectively. Nuclear energy accounted for approximately 6% of energy consumption in Europe.

In terms of energy production, Europe is heavily reliant on fossil fuels, particularly natural gas. According to Eurostat, the European Union (EU) produced approximately 1,315 million tonnes of oil equivalent (Mtoe) of primary energy in 2019, with natural gas accounting for 27% of production, followed by coal (15%), nuclear energy (13%), and renewable sources (10%). However, the EU is also a significant net importer of energy, with approximately 58% of its energy needs being met through imports.

The energy situation in Europe faces a range of challenges, including increasing energy demand, aging infrastructure, geopolitical risks, and the need to reduce greenhouse gas emissions to mitigate climate change. One of the most significant challenges facing the region is the shift towards renewable energy sources, which requires significant investment in new infrastructure and technology.

Another challenge is the aging of Europe’s energy infrastructure. According to the European Network of Transmission System Operators for Electricity (ENTSO-E), approximately 70% of Europe’s electricity grid is over 25 years old, which can lead to reliability issues and increased maintenance costs. The need to replace aging infrastructure is further complicated by the increasing demand for electricity due to population growth, urbanisation, and the electrification of transportation.

Geopolitical risks also pose a challenge to Europe’s energy security. The region is heavily dependent on energy imports from Russia, which accounted for approximately 40% of natural gas imports to the EU, before the war.  Tensions between Russia and Ukraine, through which a significant amount of natural gas pipelines pass, have led to supply disruptions in the past, highlighting the vulnerability of Europe’s energy supply. After the war started, in February of last year, Russian gas imports have slowly ground to a halt.

Finally, reducing greenhouse gas emissions is a critical challenge facing Europe’s energy situation. The region has set ambitious targets to reduce emissions, with the EU aiming to achieve carbon neutrality by 2050. Achieving this goal will require a significant shift away from fossil fuels towards renewable sources, as well as increased energy efficiency and conservation. This target is however considered to be unrealistic by quite a few voices inside the EU. The underlying motives for such a bold objective may be noble, but they will not help with the worldwide environmental situation if they are not met with similar actions from the other large geopolitical players like the United States of America and China. Seeing as the environment is not something that can be addressed locally it is also important to note that developing countries run the risk of doing far more damage in the future than can be mitigated by large, developed economies. This is an issue that should be addressed before committing to actions that may weaken Europe’s competitive edge.

To address the challenges facing Europe’s energy situation, a range of solutions are being pursued. One potential solution is the development of renewable energy sources, such as wind, solar, and hydroelectric power. The EU has set a target of generating 32% of its energy from renewable sources by 2030, and significant investment is being made in new infrastructure and technology to achieve this goal. This solution appears to be the most effective on the long term, but it has the disadvantage of being rather expensive. The added cost to the bill will most probably be supported by end-users whether they be private households or companies. From an economic perspective this solution raises the question of how the European families or companies may be compensated for the losses incurred.

Another potential solution is the development of energy storage technologies, which can help to mitigate the intermittency of renewable energy sources. Battery storage, pumped hydro storage, and compressed air energy storage are all being explored as potential solutions to store excess renewable energy for use during periods of high demand.

Improving energy efficiency is another potential solution for Europe’s energy situation. Increasing energy efficiency in buildings, transportation, and industry can reduce energy consumption and emissions, while also reducing costs for consumers and businesses. Energy-efficient buildings, for example, can significantly reduce heating and cooling demand, while electric vehicles can help to reduce transportation-related emissions.

Investing in research and development of new energy technologies is also crucial for Europe’s energy future. Advances in areas such as energy storage, carbon capture, and renewable energy technology can help to reduce costs and increase efficiency, making renewable energy more competitive with fossil fuels.

Finally, improving Europe’s energy security requires diversification of energy sources and suppliers. This can include increasing the share of renewable energy, as well as investing in energy infrastructure to support the development of new supply routes and sources.

Looking at things from a different angle the EU member states may still find opportunity in this very difficult problem they face. Before the conflict between Russia and Ukraine there was still hope of a good collaboration with our gas rich neighbour to the east hence companies and governments alike had far less incentives to invest in other sources. For all the chaos and destruction, it brought the conflict at the EU’s eastern border has brought clarity regarding at least this aspect: Russia is not to be trusted as a partner. This aspect is, in the author’s opinion crucial to the way our economies will model energy businesses across the continent. It may be a great opportunity to look at the energy market not as consumers of products but as producers. Seeing as China’s strategy for future development remains unclear, it is perhaps time for Europe to turn its attention within and rejuvenate its domestic production capabilities not only in the field of energy but other products as well. One example of such products is the microchip, something our allies across the Atlantic Ocean seem to have taken a keen interest in.

Europe’s energy situation is complex. However, a range of potential solutions exist to address these challenges, including the development of renewable energy sources, energy storage technologies, improving energy efficiency, investing in research and development, and diversifying energy sources and suppliers. By pursuing these solutions, Europe can ensure a sustainable and reliable energy future for generations to come. An even more radical approach would be for Europe to awaken it’s long forgotten production capabilities and become more self-reliant, more independent and by doing this a lot more secure. This is not an easy task. It is by no means an easy to complete objective. It is however signal of a strong mindset of a united Europe that can in turn transform a crisis into an opportunity through the diligent effort of the European Union’s members.