Renewables are the way out of Europe's crisis

Yesterday, the European Commission unveiled a host of policies that it said countries should use to cope with the energy crisis that is gripping Europe.

In the short-term, it suggests emergency support for energy-poor customers; safeguards to stop people being disconnected from grids; and targeted state aid or reduced taxation. In the longer term, it said countries needed to speed up permitting for renewables; invest in energy storage; and revise supply rules.

This is potentially good news for those in the wind sector – and shows that this is a crisis that companies cannot afford to waste.

Let’s quickly re-cap the situation. Power prices have risen to all-time highs, which are set to be exacerbated further as the cold winter months roll in.

There are many reasons for the crisis. It is caused by variables including rising carbon credit prices, the rocketing cost of natural gas, and problems with the transmission infrastructure. Low output from wind farms over summer has also played a role, and the result is bills and blackout risks are rising.

So, what does this mean for those in wind? And how can countries respond?

Natural gas rises

The biggest reason for Europe’s energy crunch is the rise in natural gas prices.

Since the beginning of 2021, the cost of wholesale gas in Europe has surged 250%; and the continent has suffered due to the shortfall in gas deliveries from countries including Russia and Algeria.

Europe has also suffered due to record demand for liquid gas in Asian economies, and rising energy demand globally as nations come out of pandemic lockdowns. Europe is not immune from these global challenges.

In addition, an unseasonably cold winter in Europe in 2020 and 2021 means that the continent is especially vulnerable, as natural gas reserves are very low. This should remind us that wind is not the main culprit for the crisis.

But, of course, wind is part of the power market and operators have been facing their own challenges. Low electricity production from wind farms over the summer months have contributed to raising electricity prices, but it is not the only reason that bills have gone up. The higher natural gas prices have also encouraged people to use electricity instead if possible.

The wind industry does need to be on guard though.

Whenever there is an energy crisis, it is easy for those who don’t like wind to blame current high prices on the energy transition. After all, we wouldn’t be making a switch to natural gas if we were all allowed to keep burning all that lovely coal! The argument is as dangerous as it is simplistic.

Critics of renewables will also rehearse the old arguments that moving to wind and solar will increase fluctuations in the power supply because renewables suffer when the wind isn’t blowing and the sun isn’t shining. There is truth in that, although there is a huge amount of attention in the industry on how best to forecast production and also to store excess energy in both short-duration and long-duration storage.

Thankfully, this has not swayed the European Commission, which clearly does not see the current crisis as a reason to ditch renewables. Quite the opposite.

Moreover, those criticisms are being increasingly answered by technology.

And yes, we can also point to the fact that wind speeds in northern Europe were 15% lower on average in some areas in 2021 than in previous years. But this is, predominantly, still a gas-driven crisis. Winds will bounce back while the geopolitics of the natural gas industry will remain.

This is not the time for countries to turn their backs on the energy transition. Indeed, with COP26 climate talks due to start in Glasgow this month, this is a time we should double down.

Finally, some of the current crisis is down to plain old bad luck, such as a fire at a key interconnector in Kent that links the UK and French power markets. That is an argument for the UK and France to focus on becoming more self-sufficient by supporting faster rollouts of wind, solar and storage.

Where do we go from here?

Wind is not to blame for Europe's energy crisis.

The current problems are primarily caused by the natural gas market and so should, therefore, be a reminder about the folly of relying long-term on natural gas as a bridge away from other fossil fuels. The best way to evolve Europe’s energy system is to focus on rolling out renewables more quickly.

This crisis won’t be easily resolved, but it also isn’t the moment for investors in wind to back down. In that, the European Commission has shown its support.