The Energy Collective Group

This group brings together the best thinkers on energy and climate. Join us for smart, insightful posts and conversations about where the energy industry is and where it is going.

9,854 Members

Post

The EU Wants to Fight Climate Change, So Why Is It Spending Billions On a Gas Pipeline?

By funding the Trans Adriatic Pipeline (TAP), the European Investment Bank (EIB) is hardly signalling to the private sector that governments are committed to a green energy transition, writes Aled Jones, Professor and Director at the Global Sustainability Institute of  Anglia Ruskin University. Article courtesy The Conversation.

Over the past few years there has been exponential growth in clean energy investment – while fossil fuel assets are increasingly considered to be risky. Yet, on February 6, the European Investment Bank, the EU’s long-term lending institution, voted to provide a €1.5 billion loan to the controversial Trans Adriatic Pipeline (TAP).

The TAP is the Western part of a larger Southern Gas Corridor proposal that would ultimately connect a large gas field in the Caspian Sea to Italy, crossing through Azerbaijan, Turkey, Greece and Albania. And while gas might be cleaner than coal, it’s still a fossil fuel.

So how does the EU’s support for this major project fit in with its supposed goal of addressing climate change?

Controversial message

A key problem is the message this sends to the private sector, where renewable energy is increasingly seen as a good investment. Technologies once perceived as too risky and too expensive are now delivering worthwhile returns thanks to reduced costs and breakthroughs in energy storage. The price of electricity generated by solar, wind or hydro is now comparable with the national grid. Over the past decade, investor meetings have shifted from discussing whether the transition to a low carbon economy will start before 2050, to whether it will be completed in the same period.

One issue facing policy makers is how to influence investors away from fossil fuels and towards renewable projects.

But there is still not enough money being spent on renewables. While clean energy investment in 2017 topped US$300 billion for the fourth year in a row, this is far short of what is needed to unlock the technology revolution necessary to tackle climate change. There is clearly a gap between what is required and what is being delivered.

The private sector will continue to invest significant capital into energy projects over the next few decades, so one issue facing policy makers is how to influence investors away from fossil fuels and towards renewable projects. To really scale up investment into renewable infrastructure, long-term and stable policy is required – which investors see as clearly lacking.

By funding the Trans Adriatic Pipeline, the EU’s investment bank is hardly signalling to the private sector that governments are committed to a green energy transition.

In just a decade or two, super-cheap solar and wind power could mean that gas pipelines such as TAP would no longer make financial sense.

If Europe really was to follow through and successfully switch to green energy – and such a transition is partially underway – then the pipeline project may even represent a risk to public finances.

Investment risks

Studies on climate change point to the need for a greater sense of urgency and ambition and, to stay within its “carbon budget” under current agreed emissions targets, the EU needs to be fossil fuel free by 2030.

So any large oil and gas infrastructure projects with investment returns beyond 2030 are saddled with risk. In just a decade or two, super-cheap solar and wind power could mean that gas pipelines such as TAP would no longer make financial sense and would become worthless “stranded assets. Yet TAP backers are touting economic benefits for countries such as Albania extending to 2068 – well beyond the date when Europe must entirely ditch fossil fuels.

Abundant natural gas is also highly likely to delay the deployment of renewable technologies.

The EU’s official stance is to hail natural gas as a cleaner “bridge fuel” between coal and renewables. But high leakage rates and the potent warming impact of methane (the primary constituent of natural gas) means that the Southern Gas Corridor’s climate footprint may be as large, or larger, than equivalent coal. Abundant natural gas is also highly likely to delay the deployment of renewable technologies.

For the first decade of this century Europe prided itself on leading the political debate on tackling climate change. Now, it appears to be losing its boldness. To drive through a new technology revolution, the public sector needs to lead from the front and take bold decisions about its energy strategy.

A gas pipeline is not a technology of the future. If California can release YouTube videos describing the importance of considering stranded assets during this energy transition, and New York City can announce plans to divest from fossil fuels, then maybe it is time for the EU to turn off the TAP.

Editor’s Note

This article was first published on The Conversation and is republished here with permission from the author and publisher.

Original Post

Content Discussion

Bob Meinetz's picture
Bob Meinetz on February 15, 2018

And while gas might be cleaner than coal, it’s still a fossil fuel. So how does the EU’s support for this major project fit in with its supposed goal of addressing climate change?

Good point, Aled. Can’t be emphasized enough.

The price of electricity generated by solar, wind or hydro is now comparable with the national grid.

Not-so-good point – the price of electricity generated by renewables “is now comparable” if we assume EU consumers only need electricity when the sun is shining or wind is blowing. But they don’t, so natural gas is necessary to fill in the spaces – raising the combined price to multiples of the cost for even natural gas alone.
Renewables & natural gas are, and will always be, a “package deal” – another point which can’t be emphasized enough.

Bas Gresnigt's picture
Bas Gresnigt on February 15, 2018

… natural gas is necessary to fill in the spaces – raising the combined price to multiples of the cost for even natural gas alone.

Never heard of Power-to-Gas with storage?

John Miller's picture
John Miller on February 15, 2018

Bob, also another factor that those in the U.S. overlook is that EU electricity costs their Consumers 2x-3x average U.S. Consumers. Another factor the EU needs to consider is the impact on their energy security; since Russia is their major natural gas supplier.

Jarmo Mikkonen's picture
Jarmo Mikkonen on February 15, 2018

Studies on climate change point to the need for a greater sense of urgency and ambition and, to stay within its “carbon budget” under current agreed emissions targets, the EU needs to be fossil fuel free by 2030.

I am 100% sure that this will not happen. Leaving coal aside, Germany, the UK and Italy are among the biggest natgas importers in the world.

While clean energy investment in 2017 topped US$300 billion for the fourth year in a row, this is far short of what is needed to unlock the technology revolution necessary to tackle climate change. There is clearly a gap between what is required and what is being delivered.

The fallacy over here is that solar and wind deployment will cut emissions effectively. In Germany, emissions in the power generation sector have remained essentially flat for almost 20 years despite boosting wind and solar and investing hundreds of billions of euros into them.

On the other hand, switching from coal to gas has cut energy sector emissions in the UK and in the US significantly.

If you are looking at the best solution, just take a look at the cleanest grids anywhere in the world. They have two things in common: either large nuclear component, large hydro component or both.

Jesper Antonsson's picture
Jesper Antonsson on February 16, 2018

The author seems completely unaware that renewables’ role is to save fuel when the weather allows. So what fuel is it going to save? The best suited fuel is gas and that’s why gas companies absolutely love subsidies to renewables: They help push out nuclear and coal, and provide gas with a very secure, important and lucrative job of supplying the grid with high-value kWhrs when there is low wind/solar production.

Bas Gresnigt's picture
Bas Gresnigt on February 16, 2018

John, your statement: ” EU needs to consider is the impact on their energy security; since Russia is their major natural gas supplier.”
is right to the point.

All pipelines are under Russian control but TAP is not under Russian control….

Bas Gresnigt's picture
Bas Gresnigt on February 16, 2018

In Germany, emissions in the power generation sector have remained essentially flat for almost 20 years…

?? In the past 20years German emissions per KWh dropped relarly:
1996: 689 gCO2/KWh.
2006: 602 gCO2/KWh.
2011: 576 gCO2/KWh.
2016: 527 gCO2/KWh.
Decrease; 24%.

Total emissions due to German electricity consumption decreased also, though less due to economic grow and increase of the population (a.o. immigration of refugee’s).
1996: 332 Million ton CO2eq
2006: 328 Million ton CO2eq
2011: 311 Million ton CO2eq
2016: 278 Million ton CO2eq
Decrease; 16%.

Figures from UBA. The Umwelt Bundes Amt, the responsible govt dept.
More recent official CO2 figures not known (not published by UBA).

Jarmo Mikkonen's picture
Jarmo Mikkonen on February 16, 2018

Bas, it’s a neat trick to calculate only emissions from German electricity consumption. That way, you can pretend some emissions from German fossil fuel plants disappeared.

The honest way is to include all the fossil fuels Germans burn to generate electricity. After all, without them the German grid with intermittent renewables would collapse. Those figures show much smaller decreases in emissions, for example for 2016 332 million tons versus your 278 million tons. There’s a 12 % difference there or 52 million tons.

Here you can find the relevant facts:
https://www.cleanenergywire.org/factsheets/germanys-greenhouse-gas-emissions-and-climate-targets

Mark Heslep's picture
Mark Heslep on February 16, 2018

P2G with storage does not exist at utility scale in Germany, no more than cold fusion (which also has some experiments).

Mark Heslep's picture
Mark Heslep on February 16, 2018

UBA data here.

https://www.cleanenergywire.org/sites/default/files/styles/lightbox_image/public/images/factsheet/20180201-uba-german-greenhousegasemissions1990-2016.png

Total CO2 from electricity 2016 over 2000 is down 7%, and 2020 is almost certainly going to be within a point of 2016 with coal, lignite, gas all flat or up in 2017, and nuclear down from 8 reactors to 7.

Bob Meinetz's picture
Bob Meinetz on February 18, 2018

Bas – assuming Germany can continue emissions reductions at the rate they currently are (they can’t), they’ll be 95 years late in meeting their 2030 goal of freedom from fossil fuels.

To add insult to injury, Germans are paying an exhorbitant price for the failure of renewables. Electricity prices are 33% higher in Germany than the EU-28 average, second highest after Denmark.

https://www.cleanenergywire.org/sites/default/files/styles/lightbox_image/public/images/factsheet/average-household-power-prices-european-countries-2016.png

Bas Gresnigt's picture
Bas Gresnigt on February 19, 2018

The emissions in my first table concern all generated electricity in Germany (check the UBA report).

Your position implies that zero emissions are assigned to the German net export of electricity. As that seems unrealistic to me, I follow the official govt institute UBA which assigns the av. emissions to net export. Hence the same av. emissions apply for German consumption.

It’s especially unrealistic to assign all emissions to German consumption because net export increased to more than 7% of total production (German net export surpassed that of France).

Btw.
Your graph (hence your 332 figure) doesn’t state emissions due to electricity but due to energy industries which enclose much more.

Bas Gresnigt's picture
Bas Gresnigt on February 19, 2018

Your graph doesn’t state emissions due to electricity but due to energy industries which enclose much more.

Considering the increasing speed of the Energiewende with major production increase by renewable in 2017, your assumption for 2020 is almost certainly wrong.

Bas Gresnigt's picture
Bas Gresnigt on February 19, 2018

I’m not aware of a German 2030 freedom from fossil fuel goal.

I estimate that regarding electricity, renewable share will be ~70% (mostly wind & solar) in 2030.

As in NL electricity and gas prices for households are mainly taxes. It stimulates that households try to save on energy (switch to LED lamps, etc).
With success as demonstrated by the fact that the average German household pays a lower share of its income for electricity than the average US household!

Btw
Similar seems to occur within USA. The recent (18 Feb.2018) EIA post at this site compares prices and consumption amounts between different states.

Bas Gresnigt's picture
Bas Gresnigt on February 19, 2018

Wind + solar share is with 25% still so low that there is no need yet.
Why invest now in something which is needed after ~2025?

They have now enough time for piloting, which they do. Comparing and improving different technologies.

Mark Heslep's picture
Mark Heslep on February 19, 2018

The graph above is made by Clean Energy Wire, not me, from UBA data, as labeled.

Considering the increasing speed of the Energiewende with major production increase by renewable in 2017, your assumption for 2020 is almost certainly wrong..

As you commonly note, Energiewende is first about phasing out nuclear; everything else is secondary. So too here. Citing the annual RE share doesn’t by itself indicate emissions trends. ‘RE’ is up or down in a given year depending on favorable winds, precipitation feeding hydro, and so on.

Germany added about 5 GW of onshore wind for 2017, *and* closed another reactor in December, -0.8 GW. Germany notoriously has some of the lowest onshore wind capacity factors in Europe, 18%, so that the average annual onshore wind power increase is 1GW.

Also, as the wind fleet grows to larger share, increasing amounts on seasonal (winter) high wind days are exported. See a recent 2018 high wind day when 10GW went out the door to the neighbors, during which the spot market price hit -50 euro per MWh.. In summary, the balance of clean power coming and going in 2017 was about flat.

Mark Heslep's picture
Mark Heslep on February 19, 2018

…electricity and gas prices for households are mainly taxes

No, as you know and as the chart above from Clean Energy Wire indicates, both taxes and surcharges are included on top of electricty rates, the majority surcharges, such as the FiT. Germans pay $12 billion a year for the solar FIT alone (Fraunhofer Recent Facts), with a guarantee of 20 years.

https://www.cleanenergywire.org/sites/default/files/styles/lightbox_image/public/images/factsheet/composition-average-german-power-price-households-2017-and-2018.png

German household pays a lower share of its income for electricity than the average US household

As you know, Germans pay similar overall household energy costs to the US despite larger, older, and less efficient housing in the US, given a substantial pre-WW2 building fleet. Household air conditioning use is almost nonexistent in Germany, holding down electricity costs, but heating usage of expensive LPG is high and the house heating cost is higher than in the US.

“…. taxes. It stimulates that households try to save on energy…

If this is a good thing, dramatically increase the taxes on energy, housing, and food. Then Germany and the NL could have a very thin population living on subsistence diets and with a per capita energy consumption similar to that of Eritrea.

Mark Heslep's picture
Mark Heslep on February 19, 2018

As usual, no argument, just an assertion of “no need” for storage.

A couple weeks ago Germany had a couple days of high winter wind where exported power hit 10 GW and the spot price hit -50 euros per MWh.

Get Published - Build a Following

The Energy Central Power Industry Network is based on one core idea - power industry professionals helping each other and advancing the industry by sharing and learning from each other.

We are always happy to have new members join us in that mission. If you have the knowledge to share, it is easy to post on Energy Central. Once your post is approved, it will be published on our website (with more than 100,000 users/month) and may also be published in one of our newsletters (which have between 10,000 and 60,000 circulation).

If you have an experience or insight to share or have learned something from a conference or seminar, your peers and colleagues on Energy Central want to hear about it. It's also easy to share a link to an article you've liked or an industry resource that you think would be helpful.

                 Learn more about posting on Energy Central »