If You Can’t Beat Them, Green Them – Analysis – Eurasia Review

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By Lydia Powell, Akhilesh Sati and Vinod Kumar Tomar

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The European Union (EU) has proposed a new green taxonomy under which certain natural gas and nuclear power projects can qualify as “green” investments if they meet specific criteria. A nuclear power plant is labeled green if the project has a plan, has secured funding, found a site to safely dispose of radioactive waste, and is able to receive construction permits before 2045. For natural gas, the criteria are that the plant has emission levels below 270 grams of carbon dioxide equivalent per kilowatt hour (gCO2eq/kWh), it replaces a dirtier fossil fuel plant, receives planning permission before 2030 and plans to switch to low-carbon gases by the end of 2035. This is part of the broader green taxonomy that the EU is developing. The first part of its taxonomy regulation which included environmental criteria for investments in renewable energy (RE), maritime transport and car manufacturing is applicable from January 2022.

Over the past two decades (1999-2019), primary energy consumption in the EU has fallen by more than 4%, from around 63 EJ to 60 EJ (exajoules). Over the same period, the share of fossil fuels in the EU energy mix decreased by around 13%, from 51.46 EJ to 44.57 EJ. Most of the decline in fossil fuel consumption was driven by coal, which fell more than 37% over the same period. Natural gas consumption increased by more than 11% and renewable energy consumption increased by more than 1,200%, albeit from a very small base.

In 2019, fossil fuels provided around 73% of the EU’s primary energy, with oil accounting for around 38%, natural gas 23% and coal around 12%. Nuclear energy accounted for more than 11% of primary energy consumption, renewable energies around 10% and hydroelectricity around 4%. Energy production in the EU in 2019 was dominated by renewables which accounted for 37% of total production, followed by nuclear energy which accounted for 32%, solid fossil fuels 19%, gas 8% and oil 4%. Imports accounted for around 60% of EU energy consumption and Russia was the main source of oil, natural gas and coal imports. In 2000, fossil fuels accounted for 84% of energy consumption in Germany. Since 2000, Germany has developed 90 gigawatts (GW) of renewable energy generation capacity equal to its total electricity generation capacity. However, in 2017, fossil fuels continued to provide 80% of energy consumption, illustrating the challenge of energy transition.

Energy density

One of the major challenges of the energy transition is the energy density of fuels, ie their ability to deliver substantial amounts of energy in relation to their weight or their physical dimensions. The energy density of natural gas at 40 million joules per cubic meter (J/m3) is only one thousandth the energy density of oil but more than 10,000 billion times that of solar energy. The higher the energy density of an energy source, the lower the transport and storage costs. The energy density of nuclear power is more than 10 billion times greater than that of petroleum, implying that the energy densities of solar and other renewable sources are miniscule compared to that of nuclear power. The high energy and power densities of natural gas and nuclear power mean that these energy sources require less area or land. With the shift to renewables, the EU and the rest of the world are moving down the energy density ladder, from highly concentrated fossil fuels to more dispersed renewable sources that will require 100 or even 1,000 times more land for production. energy than today. For example, in 2010, modern RE sources (excluding hydropower) required nearly 270,000 square kilometers (Km2) to provide 130 GW, while the fossil fuel-nuclear-hydro system provided 14.3 terawatt-hours of power (more than 110 times that of renewables) required about 230,000 km2.

Carbon Dioxide Emission

A natural gas combined cycle power plant can emit 403-513 gCO2eq/kWh from a life cycle perspective and between 49 and 220 gCO2eq/kWh with carbon capture and storage (CCS), including methane emissions from the extraction and transport phases. In comparison, solar technologies emit between 27 and 122 gCO2/kWh for concentrated solar power (CSP) and 8-83 gCO2eq/kWh for photovoltaics (PV), with thin-film PV technologies emitting less than PV technologies. silicon-based. Carbon emissions from nuclear power are an order of magnitude lower than those from solar power at 5.1-6.4 gCO2eq/kWh, with the fuel chain contributing most of the emissions. The expansion of renewable energy responds to a global objective, that of reducing carbon emissions, but not to all global objectives. In the EU, the unintended macroeconomic consequences of the rapid development of renewables, such as energy price inflation and the resulting impact on inequality, are becoming significant.

Energy price inflation

The price of energy in the EU has reached unprecedented levels in 2020. The European Central Bank (ECB) has acknowledged that this is partly due to the ongoing energy transition. According to the ECB, the combination of insufficient RE generation capacity in the short term, subdued investment in fossil fuels and rising carbon prices risks putting the EU through a prolonged transition period in the during which energy prices will continue to rise. The ECB expects the green energy transition to reinforce supply and demand imbalances resulting from adverse weather conditions in 2021 which limited renewable energy production, pushing gas prices to record highs. In November 2021, wholesale electricity prices in the Eurozone reached €196/MWh (megawatt hour), almost four times the average of the two years preceding the pandemic. The ECB said energy price inflation was the main factor behind inflation which reached its highest level since the introduction of the euro in 1999. Although the regime more strict carbon pricing has led to reduced emissions and increased green innovation, these have peaked. the cost of higher energy expenditure for poorer households. On an annual basis, a doubling of wholesale electricity prices from around €50/MWh to €100/MWh would mean an additional €150 billion to be recovered from consumers. This will affect poor households much more than rich ones. The proportion of people who said they could not afford to keep their homes warm enough is as high as 30% in some of the less affluent countries in the EU. This is despite the fact that Eastern EU states with a low RE contribution have lower electricity prices than Western European states, with a higher percentage of RE in the EU. total energy, had higher electricity prices. In addition, studies on the EU economy have concluded that a 10% increase in the price of electricity can lead to a 2% reduction in employment at company level.

Consequences

The EU’s new green taxonomy has angered many environmental groups because it appears to completely deviate from the EU’s role as a leader in the ideological charge against fossil fuels and nuclear power. They are disappointed that the new taxonomy compromises their cherished goal of 100% RE. They fear that investing in gas and nuclear will lock in these technologies and slow the adoption of renewables. That may be true, but not if the EU’s goal is longer-term hydrogen decarbonisation. Natural gas and nuclear power can be used to produce hydrogen, and infrastructure built for natural gas can eventually be used to transport hydrogen.

For India, which has simultaneously embraced renewables and hydrogen as means of decarbonisation, the EU experience will hold valuable lessons. More importantly, the EU’s new green taxonomy could become the global regulatory standard for green investments that India may eventually adopt. Under the new taxonomy, investments in natural gas and nuclear projects in India could become more attractive as the cost of capital for these projects is likely to decrease with the decrease in perceived risk. There is also a lesson to be learned from the EU’s embrace of natural gas and nuclear power. His down-to-earth, technology-agnostic approach to decarbonization was likely inevitable, as the unintended economic, social, and political consequences of rising renewables became harder to ignore. India should take note as it is less wealthy and more unequal than the EU.


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