· 10 min read
The misguided frenzy
In August and September, Europeans were understandably concerned that they might be freezing in the dark this winter due to the Russian invasion of Ukraine and the disruption to natural gas supplies. Thankfully, this is not what has transpired. Unlike many, however, I’m not surprised that Europe is doing fine. I published an assessment in September that the energy crisis would be short lived and reap significant benefits for Europe, and coincidentally the world.
My thesis had multiple points, and it’s worth looking back at each one to consider how things have turned out over the past five months. But to start, I’d like to lean into the future of energy flows, with the concept of strategic energy interdependence.
The future of energy
Energy independence and the overlapping term energy autonomy are archaic strategies that made sense when grids were dumb, all electricity generation was from local burning of fossil fuels, and long distance transmission was a gleam in the eyes of people who saw the potential of massive hydroelectric projects. That’s going back a century.
Since then, projects like the Grand Coulee Dam in eastern Washington State, the James Bay hydro facility in northern Quebec and modern dams like China’s Three Gorges site have been built in remote locations and linked to demand centers often 1,000 kilometers or more away. Electricity from James Bay, for example, flows over 1,500 kilometers as the crow flies to power New York City. Electricity from the Three Gorges Dam flows 940 kilometers through HVDC lines to Changzhou.
About 132 GW of new hydroelectric capacity has been added since 2000, with 113 GW of it in China alone. For context, in the same period China added roughly 450 GW of wind energy capacity, 400 GW of solar capacity and only 49 GW of nuclear capacity. Just as with wind and solar, China’s hydroelectric grid connections have been accelerating over the past decade, while nuclear peaked in 2016 and is limping along by comparison for the past five years, with only 1-3 GW of new capacity per year.
Distances like these are larger than most countries’ geographical extents, and around 2012 the last barriers to wide-scale HVDC transmission dropped with ABB’s development of a hybrid electronic-mechanical breaker which had the characteristics of sufficient response speed combined with sufficient robustness. China alone has built tens of thousands of kilometers of HVDC to move wind, solar and hydro power from the remote reaches of its land area to its power demand centers, mostly in the lower two-thirds of the eastern side of the country. Most offshore wind farms are connected to shore by HVDC.
Remote and barely populated areas of the world abound, have cheap land and lots of it. There are no constraints on our ability to build renewable projects. As Professor Bent Flyvbjerg points out in his excellent new book, How Big Things Get Done, wind, solar and transmission projects are highly modular and very low risk compared to most other major project types, based on his data set of 16,000 projects spanning 25 categories. They tend to get done on time and on budget once the shovel hits the ground. And there are a lot of transmission lines, wind farms and solar farms that are fully planned and just waiting to find funding and approval to start construction.
On a related note, many are attempting to imply that pipelines can transmit much more energy than HVDC transmission lines, in an attempt to make it seem as if transmitting lots of hydrogen long distances that way is a foregone conclusion. As I pointed out last year, you have to draw the systems boundary of assessments very narrowly and use artificially low HVDC transmission capacity assumptions to get those results. HVDC is completely fit for purpose for delivering the massive amounts of energy our society needs, especially as we electrify everything and stop wasting so much of it.
As a result, the future of electricity is lots of wind, solar and water, connected with lots of HVDC across large distances and borders, firmed with much less grid storage than most assume is required, mostly in the form of pumped hydro.
Which brings us back to strategic energy interdependence. When those HVDC lines go in, they can’t come from bad actor states as pipelines, LNG tankers and petroleum tankers so often do now. Picking the countries to link with to share electricity becomes important.
Transnational links
For Europe, that’s the non-Russian parts of Eastern Europe and the northern countries of Africa. As I pointed out when I assessed EU green hydrogen plans in Morocco, Algeria and Egypt, it made much more sense to lean into MEDGRID and link Europe with the Maghreb with HVDC across the Mediterranean in three places. And now both of those are going ahead, with the recently announced HVDC connections from Georgia to Romania and Tunisia to Sicily.
For other countries, such as the ASEAN nations, South Korea and Japan, it’s China and each other, and hopefully Australia. For North America, it’s America, Canada and Mexico, and Joe Biden’s early proposal to put an HVDC backbone through Central America to South America is still a great idea for multiple reasons. China seriously proposed a transpolar HVDC grid linking the northern continents in 2016, something that likely makes sense but is unlikely given the geopolitical tensions being caused by America and Europe being surpassed economically by that rising giant.
No country can have a high standard of living without massive cross border flows of goods, services, energy and data in the 21st Century. It’s impossible to wind back the clock to pre-trade isolationism without also winding the social and economic clock back decades or further. As Peter Stearns, a leading academic in the relatively new discipline of world history says in his lecture series, A Brief History of the World, globalism really started about 1,000 C.E. We aren’t going to move back to isolationism except in fragments here and there around specific goods and technologies.
Assuming that electricity is somehow different and that cross-border energy flows must be in the form of molecules is a deeply odd perspective given the observable reality of rapidly increasing HVDC interconnections and massive deployments of renewables across broad geographic regions.
But what about Europe’s energy crisis?
As I wrote in September, it was a perfect storm. Natural gas prices were going to become more volatile even without the Russian invasion of Ukraine due to the Saudi Arabian-Russian price war on oil that was going to put a lot of shale oil and hence its related natural gas production out of business, and the debt economics of fracking failing to actually turn into profits. But the invasion amplified that pre-existing trend and Russia’s destruction of Nord Stream 1 and 2 cemented the loss of supply.
The Fukushima nuclear disaster combined with the empirical evidence of grid reliability with high penetrations of wind and solar meant that a lot of nuclear generation had dropped off the grid in Germany. In France, COVID-19 had deferred maintenance on some reactors to 2022, other reactors required refueling, and then the N4 series of reactors were found to have unexpected corrosion on critical pipes leading to that line being taken off the grid entirely until safety could be assured. In total, 30 of France’s 56 reactors were offline.
France’s nuclear fleet when operating could contribute about 13% of Europe’s electrical demand every year, which is a good amount for relatively inflexible generation. With continental energy markets and grid interconnects to neighboring countries, France didn’t have the problems of less well connected jurisdictions like Ontario with its oversized nuclear fleet. France exchanges TWh of electricity annually in all directions, getting more from their neighbors when they need it, and providing more at night when they can’t shut their reactors down anyway. In 2017, for example, France imported a net 13.7 TWh of electricity from neighboring Germany, and obviously a lot more TWh flowed in both directions. (France and nuclear advocates tend to portray this as France being a massive exporter of electricity, but the reality is that they couldn’t have remotely inexpensive electricity without massive cross-border flows in both directions.)
Meanwhile, European energy buyers and strategists had been seduced by relatively cheap Russian natural gas, and pretending that it was ‘low-carbon’ compared to coal. They ignored the upstream methane emissions that put it in the range of better coal generation as a climate change issue. Europe became overly dependent on a country that was increasingly obviously heading to being a destructive, rogue state again. That was short-sighted.
So, diminished online capacity and a looming winter.
While France’s nuclear woes were and are a problem, as expected France acted quickly to get many of these reactors online again, something fairly straightforward for ones being refueled or undergoing minor maintenance. At present 18 of the 30 offline reactors have re-entered service, significantly increasing available electricity. While EDF is no longer competent to build new reactors, it’s capable of maintaining and operating existing ones reasonably well.
Europe’s natural gas reserves were 82.5% refilled in September, above the 80% target for the beginning of the heating season. Diplomatic and professional communication lines were humming as Europe reached out to anybody who might have a spare tanker of LNG to ship up into the northern Atlantic. Incidentally, global natural gas prices went up due to that as well, as domestic demand had to compete with export prices.
All of Europe’s states were working on efficiency programs to reduce demand, just as Japan met about half of its loss of electricity supply with efficiency programs including relaxing the until then still strict and formal dress codes in business so they could reduce air conditioning during sweltering summers in Tokyo.
And it wasn’t as if most of the coal plants had been demolished, or the piles of coal had been put on barges and dumped in the mid-Atlantic. Coal generation was running at significantly reduced capacity factors prior to 2022 as much as not, and there was lots of coal lying around with owners wondering what to do with it. So the coal plants were put back into service temporarily, increasing coal back up to 2013 levels briefly.
Every one of the European countries stepped up in the crisis. None of them shut their borders. They knew that they were strategically interdependent on one another for energy and trusted one another. And it’s paid off.
All of this was combined with a fairly mild winter, a lucky break the continent deserved. But I don’t think there would have been much of an issue if the winter had been more severe. Europeans are like Canadians, for the most part, in that most of them are equipped to deal with cold a lot more than they are equipped to deal with heat. More warming centers for the worst off would have been required, but it’s unlikely anyone would have frozen at home.
The biggest benefit was for the least economically well off, as they didn’t have to spend as much as they would have otherwise. Energy poverty is a concern in Europe, and the rising and much more volatile price of natural gas is another reason to get off of it.
So what are the benefits?
What’s clear is that Europe is accelerating decarbonization, renewables, transmission and electrification initiatives due to this crisis. Heat pump sales are up massively (along with especially UK anti-heat pump FUD campaigns). Insulation retrofits increased a lot. Many more offshore wind farms were approved. HVDC interconnects to the east, west and south were announced. Europeans re-learned to put on sweaters and close windows instead of just turning up the heat.
And European energy strategists learned the lesson of strategic energy interdependence, yet again. Don’t rely on rogue states for energy. Build markets and connections with stable and rational regimes. And with HVDC, make them two-way flows.
The crisis accelerated Europe’s movement away from fossil fuels, which is going to mean its GHG emissions will be lower than they would have been without the shock for every year and decade going forward. And every energy strategist and policy maker around the world is realizing that depending on natural gas is a bad idea, which will cause similar ripple effects elsewhere.
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