The “Energy Transition” as a Solution to Energy Scarcity Is Unrealistic Wishful Thinking

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BrusselsReport.eu
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By former Dutch diplomat Johannes Vervloed

The war in Iran has brought home the harsh reality to policymakers in Brussels and in the capitals of the European Union. Oil and gas remain the driving force behind the economy, and that is not likely to change any time soon.

However, current European (and Dutch) energy policy is characterised by a tension between political ambitions and the practical realities of the energy system. The objectives are clear and ambitious: Europe wants to accelerate the transition to renewable energy, phase out fossil fuels and, at the same time, become more energy-independent. In policy documents and political statements, it sounds as though this transition is not only necessary but also inevitable.

Yet a gap is increasingly emerging between this political ambition and the economic and technical reality within which the energy system must operate. Whilst governments announce major investments and formulate new climate targets, developments in the Middle East show that Europe remains heavily dependent on fossil fuel sources. The energy transition is therefore caught between ideology and reality.

Shifting into higher gear

National governments and European institutions are committing en masse to electrification and large-scale investment in renewable energy sources such as solar and wind. The Dutch government, for example, decided to allocate nearly eight billion euros for new offshore wind farms. That decision is striking, as the financial viability of such projects had previously been heavily questioned. In several European countries, tenders foroffshore wind farms failed because energy companies could not see a viable business case without government guarantees or subsidies.

At European level, the sums involved are many times greater. The European Commission estimates that around 660 billion euros will be needed annually until 2030 to achieve the energy transition. In the decade following that, that figure could even rise to nearly 700 billion euros per year. Public funds must act as a lever to attract enormous amounts of private capital. European institutions, such as the European Investment Bank, play a key role in this by setting up financial structures that limit risks for investors.

The message from Brussels is clear: these investments are necessary to make Europe more energy-independent and to meet climate targets. The energy transition is presented as the solution to the current energy crisis. Climate policy serves as a moral and political framework to mobilise even more public and private capital.

On paper, this sounds like a logical and consistent narrative. But anyone who looks beyond the narrative sees a reality that is far more complex – and sometimes downright contradictory.

Vulnerable energy system

Whilst Europe is politically committed to phasing out fossil fuels – and in particular to ending its dependence on Russian energy – the facts paint a different picture. For instance, Reuters recently reported that the supply of Russian natural gas to Europe via the TurkStream pipeline had risen by around 22 per cent in March compared to the same month a year earlier.

Plans to enshrine a permanent ban on Russian natural gas imports in European legislation have also recently been postponed due to ‘geopolitical developments’. In other words: despite all its political ambitions, in practice Europe still appears to be dependent on the very fossil fuel sources it claims to want to phase out.

Moreover, the recent disruptions to the energy market caused by the war in Iran have exposed just how vulnerable the European energy system still is. When supply routes for oil and gas come under pressure, prices rise almost immediately and uncertainty arises regarding security of supply.

In response, various European countries are reverting to solutions that run counter to climate ambitions. Italy and Germany have once again brought coal-fired power stations back online to address electricity shortages and conserve gas. In the Netherlands, too, there is now open talk of keeping coal-fired power stations operational for longer, simply because they are needed to ensure the stability of the electricity grid.

Measures of this kind underscore an uncomfortable truth: despite all the investment in renewable energy, the European energy system still largely runs on fossil fuels.

Technical limitations

This is not an ideological statement, but a technical and economic reality. Renewable energy sources such as solar and wind have fundamental limitations. They are dependent on weather conditions, so they do not provide a constant energy output and therefore require large-scale storage capacity or backup systems to keep the electricity grid stable.

That storage technology – for example, in the form of large-scale batteries or hydrogen – exists on paper, but is not yet available in practice. It is even doubtful whether these forms of storage will ever be realised (on a large scale). Batteries provide only a (very) limited capacity, and that is also short-lived. The production of hydrogen faces many problems. For instance, cost-effective production is really only possible with nuclear energy, but with just one operational plant – in Borssele – the Netherlands is barely involved in this. Furthermore, wind and solar farms place enormous demands on grid capacity. In many European countries, with the Netherlands at the forefront, grid congestion has now become a serious problem.

At the same time, the government is actually encouraging developments that further increase electricity demand. Electric cars, heat pumps and electric heating systems are being actively promoted through subsidies and tax incentives. This leads to a growing demand for a stable and reliable electricity supply.

The result is a paradox: whilst energy production is becoming increasingly dependent on variable sources such as solar and wind, the need for a stable electricity supply is growing at the same time.

The crisis as justification

Instead of using these tensions to critically evaluate existing policy, in practice the opposite often happens. The energy crisis is instead seized upon as an argument to further intensify current policy. More investment, more subsidies and more financial guarantees for investors. This is promoted in particular by GroenLinks-PvdA and is already being implemented in practice by former PvdA leader Diederik Samsom, chairman of the supervisory board of Gasunie. As a result, gas reserves have now been reduced to less than 5 per cent.

The European plan to mobilise hundreds of billions of euros a year is the clearest example. Public money is being used to socialise risks and stimulate investment in technologies that would not be profitable without such support. Such as offshore wind. Not so long ago, various projects appeared to be stalling because developers were pulling out. Without subsidies, price agreements or government guarantees, the projects proved too financially risky.

In other words: in many cases, the energy transition appears to be economically viable only when the government assumes a large proportion of the risks.

The bill for citizens and businesses

However, those risks do not disappear; they simply shift. Ultimately, the costs of this large-scale restructuring of the energy system are borne by citizens and businesses. This can take the form of higher taxes, rising energy tariffs or, indirectly, through inflation.

At the same time, the promise of lower energy costs and greater energy independence has yet to materialise. On the contrary: energy bills have actually risen sharply in recent years and dependence on international energy markets remains high.

Not an ideological project

Ultimately, energy supply is not an ideological project, but a practical system that must function under all circumstances. It must be reliable, remain affordable and be scalable for a modern industrial economy.

When political decision-making is guided primarily by wishful thinking and moral objectives, without taking sufficient account of technical constraints and economic reality, a dangerous gap emerges between policy and reality.

History teaches us that such a gap cannot ultimately persist. Political narratives may temporarily mask reality, but they cannot permanently alter it. Ultimately, it is not politics that determines what is true, but reality, which inevitably asserts itself.

That is precisely why an open and realistic debate on energy policy is more important today than ever. A debate that will hopefully continue in the Dutch House of Representatives and subsequently lead to the safeguarding of energy supply. Accelerating the energy transition is not a solution, but unrealistic wishful thinking.

 

Originally published in Dutch by Wynia’s Week.

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