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Climate Change end-fossil-fuel-subsidies-demonstration-in-Kiev-in-2012

Published on May 14th, 2014 | by Guest Contributor

19

Time To Improve Energy Security

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May 14th, 2014 by
 

Originally published on EnergyPost.
By Luca Bergamaschi 

end-fossil-fuel-subsidies-demonstration-in-Kiev-in-2012

Demonstration against fossil fuel subsidies in Kiev (http://en.necu.org.ua/ukraine-urged-to-end-fossil-fuel-subsidies/)

Poland’s proposal to reduce the EU’s energy dependence on Russia by collective buying of gas and maximising domestic production of coal shows a reactive, “security-as-usual” approach that is totally behind the times, writes Luca Bergamaschi of think tank E3G. According to Bergamaschi, the EU should instead improve its energy security by radically reforming its energy system, above all by improving energy efficiency. Studies show that Germany could cut its gas consumption by half in ten years if it wanted to – let alone a country like Ukraine, which is much more wasteful in use of gas. They also show that this provides tremendous business opportunities for companies in the EU.

There are many ways for countries to improve their energy security. In a letter to the Financial Times dated 21 April 2014, Donald Tusk, prime minister of Poland, advocates for an “energy union” that undermines Russia’s monopolistic position with the aim of reducing Europe’s “excessive dependence”. Words can deceive. As seasoned politicians well know, saying you are willing to cooperate is different from actually doing it.

Since the Ukraine crisis, Poland’s enigmatic position hasn’t changed much. What Mr Tusk proposes is a package of options based on a security-as-usual approach. He suggests drafting new agreements with European partners to negotiate bloc-based gas contracts with Russia, develop more gas infrastructure, and make “full use of the fossil fuels available”, including domestic coal and shale gas.

This is an agreement that could have been drafted back in the 1990s. Mr Tusk is well behind modern times. At that time, a reactive approach was understandable. Today however countries don’t have the luxury to treat the energy security issue in isolation any longer, without connection to environmental concerns. The latest UN Intergovernmental Panel on Climate Change report sets out clearly how the basic conditions for human prosperity – food, water and energy security – will be undermined unless countries fundamentally change their approach to energy policy, in a effort to deliver both energy and climate security.

In the European context, Tusk’s strategy is not unique. It reflects a wider perception, driven by a reactive and competitive approach, among European governments that seek to maintain direct state control on resources, companies and transit routes. This view is biased against a larger set of security and economic options, such as increasing energy efficiency and creating new markets for low carbon technologies, far better suited to respond to existing and future challenges.

Past Ukrainian governments have shown a chronic inability to reform the gas sector while attempting to diversify supplies away from Russian gas.

EU leaders need to work together to develop a fundamental, long-term solution to the EU’s energy security concerns. It will require a collective approach to a collective problem. The theory is simple: helping your neighbours achieving energy security is a way to increase your own. Energy security should be seen as a public good which requires governments’ action to define objectives and set targets. So far, markets have proven unfit to drive large-scale efficiency uptakes in the European economies.

A more cooperative approach would help boost European energy security, but could also be an opportunity to develop closer ties to Ukraine as EU businesses offer a route to wean Ukraine off its dependency on Russian gas.

The strategic role of energy efficiency in industry and building

Heavy industry, especially the metal and chemical sectors, is a key player in Ukraine’s economy. It makes up for 22% of GDP and is the largest consumer of natural gas with 40% of domestic consumption. Internationally however it remains a weak actor. Energy intensity is on average three times higher than in the EU. This means that Ukrainian companies use three times as much energy, i.e. gas, to produce the same output as their European and US counterparts. Improving the energy efficiency of existing industrial operations is therefore of strategic importance. It would drastically decrease dependency on Russian gas, in fact on any gas imports, increase the competitiveness of the industry, and reduce the country’s CO2 emissions.

Yet without external help Ukraine will fail to implement the necessary reforms, as it remains too weak to manage change alone. Past governments have shown a chronic inability to reform the gas sector while attempting to diversify supplies away from Russian gas. Diversification projects ranged from investing in gas-to-coal switch technologies financed through a $3.7 billion deal with the China Development Bank, to the construction of an LNG terminal near Odessa, as well as importing gas from Western borders via Poland and Hungary.[1]

These efforts failed to address the structural vulnerabilities of Ukraine’s heavy industry fleet. A new approach to energy security needs to consider what energy efficiency can do to reduce gas dependency in practice. New studies show that a deep implementation of existing commercial technologies in industry alone can cut Germany’s dependency from Russian gas by 20% within the next 10 years, and by half if efficiency renovations in buildings are added. What would be the impact of applying these technologies in the Ukraine economy given that the potential savings are three times higher than in Germany?

Europe’s role in safeguarding peaceful co-existence and prosperity will be inevitably shaped by its ability to redefine energy security in a multipolar, resource-constrained world.

European companies are at the forefront in designing and selling technological and digital solutions that enable other companies, as well as building owners and households, to reduce their energy consumption. Unfortunately however this important group of industry players are little heard and European governments have dedicated too little attention to the strategic role of progressive European businesses in fostering regional security. As recent declarations from a French Ministry show, EU’s energy efficiency policy is often depicted as “an unimportant obligation” which is “a kind of luxury” and “ok, but only after everything else”.

The attention of EU leaders has been much more devoted to China than to their own neighbours. During a recent visit, Germany’s economy and energy Minister agreed with the Head of China’s National Development and Reform Commission on closer cooperation with German companies in the field of energy efficiency to respond to the dramatic environmental impact of China’s growth model on citizens and natural resources.

Strengthening cooperation for the delivery of cost-effective energy savings should also be priority in the development of a robust security strategy with Europe’s nearest neighbours. For example, a more open economic cooperation with Ukraine to foster low-carbon trade would create a major opportunity for European businesses to access new markets with high prospects, and for Ukraine to effectively tackle gas dependency from Russia, maintain and increase the competitiveness of its industrial capacity, and ultimately take control of its own future. Europe’s role in safeguarding peaceful co-existence and prosperity will be inevitably shaped by its ability to redefine energy security in a multipolar, resource-constrained world.

References

[1] Based on a 2012 agreement, Germany’s RWE began deliveries of natural gas via Poland. The gas purchased from RWE is up to 16% cheaper than the new gas price imposed by Moscow of $485 per 1,000 cubic meters. In April last year Ukraine began gas imports from Hungary.

Editor’s Note

Luca Bergamaschi (@lucaberga) is a researcher for E3G, an independent environmental think tank based in London. This article was first published on the E3G blog.

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  • Banned by Bob

    Europe has consistently blown opportunities both on actual security and energy security. Sixty plus years after WWII, they still can’t defend themselves or even put up a credible defense against any outside threats without the US doing the heavy lifting. On energy security, Germany makes the silly decision to close their nukes in order to buy even more Russian gas than they were already buying. We know how earthquake prone Germany is, so that was a great risk/reward decision.

    Europe needs to take some tough action on all of these fronts, but they don’t seem very capable.

    • Jan Veselý

      It is just promotion of another startegy than “bomb them, shoot them”. Its biggest fans in the USA are (funny isn’t it) US armed forces. They feel that they should defend people not oil wells somewhere in some hell’s ass.

      • Banned by Bob

        Jan, I’ll be happy to see all US troops leave Europe. If you guys want to be speaking Russian soon, then it’s up to you.

    • solarone

      Electricity production in Germany from natural gas has fallen significantly since 2011 (when 6 nuclear plants were shut down). Renewables have filled in the gap. Gas is expensive in Germany. Russian imports are not being used to increase electricity production.

      • Banned by Bob

        It will when the next 40 or so are closed

        • Jan Veselý

          There are are 9 reactors remaining (one of them is broken and it is not sure it will run again). 3 of them are in Northern Germany which is oversuplied by wind. So, no problem. The only problem here are 4 nuclear reactors in Bavaria. But rich Bavarians bet on sun, wind, biogas, biomass CHP, hydro and load management (need for 1 reactor in Bavaria can be eliminated simply by load shifting in industry without any substantial investments). They have about 8 years to do something and when you look back what was accomplished in last 8 years …

      • Jan Veselý

        Gas is in Germany used mostly for domestic and industrial heating. So, it is time to save energy by better insulation and push for more heat pumps and CHP. current speed is about 2% per year of saved gas.

    • Ronald Brakels

      Banned, I think you’ve been watching too much Dingo News. I’m guessing that you are completely unaware that the EU’s defence budget is more than three times that of Russia? And that the question bedeviling EU foreign ministers is not, “How do we stop Putin?” but, “How do we handle this situation in a way that is least damaging to Russia, for it is Russian weakness that threatens us, not strength?” And as for security I think I’d have to say that the EU has done a more for my security in the past 20 years than the US has. By cutting CO2 emissions by a greater portion than the United States without the benefit of a natural gas boom and greatly reducing the cost of both solar and wind power, I’d say EU nations (and I’d like to give special credit to Germany here) have done more to increase the odds of surviving the 21st century down here in the Antipodes than the US has.

      • lol

        Agree, that why the government cut back on solar power to 2.1 million dollars over 4 year.

        Cut back the 1 million solar power system, good on the liberal. Time to reopen coal power stations in SA.

      • Banned by Bob

        Smack the US if you want, but we’ve actually reduced our emissions. Europe could have a gas boom to if they wanted, but they choose not to. If you are so worried about emissions, talk to the Chinese.

        Not sure what the Euros spend their defense money on. They couldn’t even cobble enough weapons to mount a No Fly Zone over Libya without running to us for help.

        • Ronald Brakels

          So because you don’t know what “the Euros” spend their defence money on you concluded, and I quote, “they still can’t defend themselves or even put up a credible defense against any outside threats…” That seems like rather an odd thing to conclude. Don’t you think maybe you should have put some effort into finding out what they spent their money on before arriving at that conclusion? Or maybe just not arrived at that conclusion to begin with and placed it in the known unknowns basket? Perhaps you should get an internet connection so you can look these things up?

          • Banned by Bob

            Here are a few things they don’t spend much money on:

            1) aircraft carriers and other naval support vessels (France is happy to sell them to the Russians though)
            2) precision guided munitions
            3) enough combat ready troops and necessary support/logistics that that don’t require a significant US presence throughout the region

            If you have any doubts, see the results of reality (Balkan War of the 1990s, Libya, current Russian threat deterrent). But don’t worry, the EU could stop buying EUA offsets from Russia. Or maybe stop selling them perfume. That’ll show em.

        • Rick Kargaard

          Don’t underestimate the european contributions. The UK lost more people than the US in Afghanistan as a percentage of their population.

        • A Real Libertarian

          Smack the US if you want, but we’ve actually reduced our emissions.

          Ah-Hem:
          http://cleantechnica.com/2014/05/16/europe/

          CO2 Emissions 1990-2012:
          USA: +7.4%
          EU: -16.7%

          CO2 Emissions 2005-2012:
          USA: -12.1%
          EU: -12.4%

          • Banned by Bob

            Buying allowances from Russia, China, et al does not count as actually reducing emissions. Europe’s emissions did not go down in actuality during the first period, although they did on paper.

            Nice try.

          • A Real Libertarian

            .
            .

  • Kyle Field

    I love that there’s a HUGE upside opportunity in these countries that would otherwise continue down the road of “energy as usual”. I’m not a fan of increasing domestic coal production and have high hopes that the younger generations (and what should be fairly attractive renewables options) bring more stability and peace to the region.

  • JamesWimberley

    I find this a bit confused by this over-complex analysis. Polish Prime Minister Tusk is proposing one good idea and one bad. The good one is setting up a monopsonist cartel to buy Russian gas from the monopoly seller Gazprom, indistinguishable from the Russian government. That should lower prices and reduce (though not eliminate) the very real risk of blackmail. The bad idea is to keep burning coal, which only Poland in the EU thinks is sensible. E3G proposes instead to go for efficiency, including helping Ukraine. Fine. Do they disagree with the gas cartel or only the coal burning?

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