Montel Magazine 4 2021 - Nordic power spat - Page 28

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Tinkering with the engine

One can argue that having access to electricity is a human right . We need it to power our homes , schools , hospitals , businesses ; the list goes on . But what happens when the cost of this electricity spirals up , as we ’ ve seen prior to the onset of winter ? And what about the source of this electricity – nuclear , fossil fuels , renewables ? European policymakers are now grappling with these two questions . It ’ s anyone ’ s guess where we will end up .
Climate scientists tell us the source of our energy needs to be clean , free of fossil fuels , for the sake of limiting extreme weather – from drought to flooding – and destruction of biodiversity caused by greenhouse gas emissions spewing from our industries , homes and modes of transportation . But some argue that until there is enough storage technology to cope with the growing capacity of intermittent renewables , we ’ ll need to rely on nuclear and clean forms of natural gas to ensure the lights stay on . Next year , EU policymakers will decide whether nuclear and gas qualify as “ green ” investments , a likely heated debate .
Equally challenging will be how policymakers decide to address spiralling energy costs . Is this a temporary blip that coincides with rising inflation and economies recovering from the pandemic slump in 2020 or is there a deeper , more fundamental issue here ? Carbon prices continue to surge to new heights – currently above EUR 80 / t – but it is still cheaper for most power plants to burn coal than gas even though the former emits twice the emissions of the latter . Does this suggest carbon prices will need to rise well above EUR 100 / t or even EUR 200 / t to deter coal-fired generation all other things being equal ? EU policymakers will also be asking these questions next year as they weigh potential market intervention measures to help consumers cope with high energy prices .
Natural gas ( and its cleaner variations ) is widely considered a temporary bridge to transition Europe away from fossil fuels . But what happens when inventory supplies are thin , like now ? Russia , which hopes to double its export capacity to Germany via the controversial Nord Stream 2 pipeline , is seen equally as potential villain or saviour . Pick a side . This debate will also drag on next year as the completed pipeline confronts its last leg of certification hurdles before turning on the taps .
The coronavirus pandemic and its various mutations will continue to rattle our nerves and the markets in 2022 but add on how policymakers tinker with the engines of the wholesale energy markets .
By Jeff Coelho , Senior sub-editor
30 Montel Magazine 4 – 2021