Gerard Reidco-founder of the company finance advisory Alexa Capital, wonders if the EU is as much as the duty of coping with the dual threats of the vitality disaster and to tug a revitalized US clear electrical energy business.
From pv journal 03/23
The excellent news is that winter is behind us in Europe and there aren’t any blackouts or emergency rationing of pure gasoline and different fuels. The dangerous information is that Europe has many challenges forward, beginning with dearer vitality, poor positioning in key vitality applied sciences, and the rising risk to European business from the US Inflation Discount Act (IRA).
Collectively, these elements threaten to undermine Europe’s competitiveness and residing requirements. To fight these dangers, Europe should reply quickly with a long-term, built-in technique.
Again in August of 2022, as the costs of electrical energy, coal, diesel, and pure gasoline hit all-time highs, it was unclear whether or not Europe would get by the winter with out main injury to its economic system. Vitality customers reacted to excessive costs by decreasing demand and by switching from pure gasoline to options akin to coal, wooden, and oil; avoiding a part of the financial impression.
Heat winter
The climate gods are type too. Europe had a heat winter, together with file temperatures in December and January in lots of areas. France can also be doing an excellent job, contemplating that in August greater than half of its nuclear reactors had been down for repairs and will not be anticipated to come back again on-line in time for the winter months. That may trigger an ideal threat of blackouts. Nevertheless, at the beginning of January, nearly three-quarters of France’s nuclear fleet was operational.
The extent of pure gasoline storage throughout Europe may be very excessive as we speak because of the decreased demand for gasoline and the aggressive buy of liquefied pure gasoline (LNG) underneath the mandate from the European Fee. Add the truth that Germany and Finland are actually opening some floating storage and regasification items and – within the worst case situation – Europe can do with none Russian gasoline, going ahead.
Fuel costs
Regardless of these successes, the continent nonetheless faces excessive gasoline costs sooner or later in addition to elevated electrical energy worth volatility and dangers. The substitute of low-cost Russian pipeline gasoline with dearer LNG means European shoppers will face greater costs within the coming months. The silver lining is that clients shall be compelled to change into extra environment friendly and swap to cleaner options akin to warmth pumps.
Coping with gasoline costs that stay greater than ever may trigger competitors issues for heavy European business, nonetheless. So as to add to those considerations, US President Joe Biden’s IRA incentives will cut back electrical energy prices for US electrical energy consumers, rising the nation’s vitality value benefit. The IRA additionally encourages home manufacturing of key decarbonization applied sciences, akin to batteries and photo voltaic panels, and it’ll assist the US re-industrialize round these key applied sciences for future development.
In the meantime, again in Europe, there isn’t any one producing lithium-ion batteries or photo voltaic panels within the prime 10 worldwide, and the normal wind business led by Europe has been destroyed, with giant, billion-euro lack of business leaders Vestas and Siemens -Gamesa. This raises the query: What needs to be finished in regards to the state of affairs?
What to not do is fairly apparent. Most significantly, procrastination and limitless dialogue should be prevented as a result of every day delayed selections cut back Europe’s capability to regain competitiveness and even equality. The second situation that should be prevented is European international locations attempting to go it alone as a result of the size of the problem can solely be met with joint and unified European efforts. The European Union should subsequently be prepared to collectively spend money on its personal future by funding R&D and new infrastructure and by taking extra dangers.
Northern gentle
Corporations such because the Swedish electrical automobile battery champion Northvolt present an instance of success the place European personal and public efforts are mixed to shortly scale up new manufacturing amenities. To compete with China, which has proven itself to be higher at increasing manufacturing amenities than Europe, there should be a joint effort led by the governments of EU member states akin to Germany and Italy, in addition to European Fee, to encourage and guarantee sooner coverage alignment in all member international locations. Coordination and reaching consensus at a quick tempo has all the time been a sore level for the EU. That is probably the most troublesome objective to attain, as a result of it requires compromise from giant and small international locations, wealthy and never so wealthy.
To succeed, European international locations should decide to the vitality transition and an open dialogue with all residents. Member states also needs to play a extra energetic position in worldwide affairs, particularly round major uncooked supplies and vitality fuels. The large query is whether or not it may be finished in Europe. The reply is sure and by doing so, Europe won’t solely break its habit to fossil fuels however may even assist create jobs and financial improvement in future-oriented clear industries.
In regards to the creator: Gerard Reid a co-founder and accomplice at Alexa Capital. He has spent greater than 20 years working in funding banking, in fairness analysis, fund administration, and company finance, with a deal with the vitality transition and the digital vitality revolution. Earlier than founding Alexa Capital, he was the MD and head of European cleantech analysis at Jefferies & Co.
The views and opinions expressed on this article are these of the creator, and don’t essentially mirror these held by pv journal.
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