Wednesday, October 5, 2022

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Without the energy industry, there is no economic recovery

A second phase of the fight against the coronavirus pandemic has begun. While many countries are opting for less restrictive measures, it is time to think also about the economic recovery.

Both the European Union’s and world’s leaders are recognising the major role that the energy sector has to play.

The EU perspective

“The EU internal energy market is functioning very well and it is resilient to the challenges we are facing during this crisis,” stated Tomislav Ćorić, Croatia’s Energy minister and current Council President, at the end of a videoconference between the EU ministers responsible for energy policy and the EU Commissioner for Energy, Kadri Simson.

Member States’ close cooperation and the introduced measures have assured the security of supply in this unpredicted period.

“The EU Green Deal can play an important role in bringing a sustainable recovery to the EU economy,” he continued. “The decrease in the emissions over the last weeks and months can be a major opportunity for the transmission and the transformation towards green growth and climate neutrality.”

In particular, the European Commission was asked to maintain its high level of ambition and proceed with its agenda of upcoming planned initiatives, such as the Energy Sector Integration proposal, the buildings renovation wave and the offshore wind proposal.

Commissioner Kadri Simson praised the Croatian Presidency for doing an excellent job during such a difficult time.

“This unprecedented emergency has put our energy system to the test,” she said. “I’m proud to say that it has proven its resilience and, as the ministers confirmed, there has been no disruption of supply. […] That does not mean there hasn’t been any impact on the energy sector. There is turmoil in oil markets, where we are experiencing a demand shock and a supply shock at the same time. Reduced electricity demand and low prices are also affecting the balance sheets of many utilities and energy companies.”

Mrs Simson was particularly worried about the situation of the European renewable energy industry, especially wind and solar, as the crisis has shown the vulnerability of the EU supply chains, reduced investment levels, shrank markets, caused delays for projects in emerging markets and, in some cases, stopped production in Europe.

“The crisis has given us a snap-shot of the future: in many countries, the penetration of renewables has significantly increased and this will become more and more common,” she continued. “We must use this moment as an opportunity to accelerate the progress towards our climate neutrality goal.”

Mrs Simson is looking at three potential focus areas in the energy sector: boosting buildings renovation, accelerating renewables development and investing in innovative clean energy technologies.

First, a large-scale boost to renovation would deliver on several fronts: support the economy, create jobs, provide healthier and more efficient houses, cut energy bills and contribute to our climate goals.

“I see homes, hospitals, schools and SMEs as the first target areas for investment,” she highlighted.

Accordingly, she will present in September the Renovation Wave initiative, a plan to stimulate building renovation in Europe with concrete actions.

“Second, we need more renewable energy,” Mrs Simson added. “On one hand, this means supporting the European renewable energy supply chains, on the other, promoting big infrastructure projects that will provide a stimulus for the economy, while making our energy system greener. Finally, we could focus on innovative clean technologies like batteries and electrolysers for hydrogen production. Europe will be an even stronger leader in renewables if green hydrogen becomes competitive and deployable in the next decade.”

Unity is strength

The current situation underlined once more a need for all countries to work together. In particular, as noted by Mrs Simson, the EU recovery plan cannot do all the heavy lifting alone but it will be a complement to national stimulus packages.

Also, the United Nations UN Secretary-General Antonio Guterres underlined the importance of cooperation and joint strategies, on the sidelines of the 11th edition of the Petersberg Climate Dialogue which took place on the same day as the EU ministers conference and saw around 30 climate ministers focusing on a sustainable recovery.

“I am asking all countries to prepare national climate action plans and strategies to reach net-zero emission by 2050,” he said.

I encourage the EU to continue to show global leadership by becoming the first climate-neutral continent.

Anticipating some concerns by emerging economies, Mr Guterres said that those countries cannot allow debt and negative financial situations to stop them from acting. However, he recognised the bigger role big polluters have to play, as without their contribution “our efforts are going to be doomed.”

Mr Guterres identified six climate actions to shape the recovery: first of all delivering new jobs and businesses through a green and just transition while accelerating the decarbonisation of all aspects of the economy. Secondly, to use taxpayers’ money to create green jobs and inclusive growth when rescuing businesses. Then, economies must shift from grey to green, using public financing that makes societies more resilient. Public funds must be invested, in the future, to projects that help the environment and climate. Additionally, economies have to take into account both risks and opportunities, as the global financial system works to shape policy and infrastructure. Lastly, Mr Guterres reiterated the importance of work together as an international community.

“Many citizens and businesses are taking action but we still lack political will in many parts of the world,” he highlighted. “We need more ambitious mitigation, adaptation and financing.”

The CEE perspective

Michał Kurtyka, Poland’s minister of Climate confirmed its country’s support to the EU to overcome the crisis, reminding how the pandemic is having an increasingly negative impact on the global and European economy, including the energy sector.

“The current situation is unprecedented and requires unprecedented actions,” he said. “Adequate financial resources at EU level will be needed and it should be our priority to avoid putting additional burdens on the most affected sectors and citizens.”

Mr Kurtyka identified four main areas of intervention needed. Regarding investments, we all must ensure the completion of key energy projects already under implementation. However, while strengthening key sectors to achieve climate neutrality, countries cannot lose sights of daily activities that allow the economy to function properly. Everybody must increase the efforts to jointly develop the technologies needed. Finally, the poorest and the most vulnerable among the citizens must be protected.

According to Minister Kurtyka, the EU energy and climate goals should remain ambitious but above all realistic, echoing Prime Minister Mateusz Morawiecki’s words when, last December, he addressed journalists saying that “Poland will be reaching climate neutrality at its own pace.”

“In times of crisis, flexibility is needed,” Mr Kurtyka said. “Member States should be left to choose the path of transformation without excluding certain technologies.”

For Poland, gas is the fastest path available to reduce emissions and improve air quality.

But nowadays not only gas is considered as a potential bridge for a renewable future and Lithuania’s minister of Energy Žygimantas Vaičiūnas reminded of what he defined as “the nuclear threat at the EU border.”

Early in April, Belarusian officials announced the construction of a new nuclear power plant that will start producing electricity by autumn.

“The only vaccine against a possible nuclear disaster is a joint effort by EU countries, the European Commission and third countries to ensure that the highest nuclear safety standards are met in power plants built there,” Mr Vaičiūnas said.

On another note, Minister Vaičiūnas agreed too on the importance of the EU Green Deal, with a special focus on renewable energy and investments in infrastructure.

“In the face of this pandemic, energy can become an area of breakthrough and new opportunities, which would allow us to take a big step towards a climate-neutral economy in the EU, ” he said.

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