Mild weather saved Europe this winter. Here’s what we must do to avoid future energy crises
The mild winter weather in Europe may have presented skiers with a challenge on the slopes, but the rest of the continent breathes a sigh of relief.
Apart from a cold snap in December, most of Europe has experienced unusually high temperatures this winter. And with spring now on the horizon, we may be able to avoid an energy crisis that could have caused serious disruption to industry and millions of homes across Europe.
In recent months, Europe has taken action to modulate consumption, fill gas storage and maximize coordination. However, a harsh winter would have presented everyone with a major challenge.
With this in mind, we should make a concerted effort in the early months of 2023 to ensure that energy security is not left to chance in the coming winter and years to come. It would be foolish to continue to rely on the weather to salvage a European energy system overly dependent on foreign fossil fuel reserves.
Almost 80% of the world’s energy needs are currently met by fossil fuels.
If ever there was a time to change course and radically transform the way we generate and consume energy, it is now. The ongoing tragedy of the invasion of Ukraine is the latest in a series of major crises that have oil and gas implications as a common factor.
2023 is the year that will finally break the cycle through sustainable investment and innovation in clean energy generation and power grids.
That’s why we at Iberdrola have identified five clear areas of action for this year – five foundations for accelerating progress towards green energy security.
Turbo for the use of renewable energies
Wind and solar farms are an increasingly common sight, but the work of decarbonizing power generation is far from over. Even the UK, which has made great strides in renewable energy deployment in recent years, still relies on gas and coal for 40-50% of its power generation mix in 2022.
One of the biggest obstacles to adding more renewable energy to the energy mix remains planning and approval. So far, too many countries have announced targets and ambitions for renewable energy without considering the broader context. We need more than rhetoric. We need the renewable energy delivery mechanisms to be embedded and prioritized in planning policies and environmental permitting processes.
More renewable energy generation is needed, but if the power grids that carry this clean energy aren’t up to par, the investment is pointless. We need sustained, well-planned investments in these networks.
Modernize power grids
Worldwide, electricity generation from renewable energies will increase fivefold by 2040. Electricity demand will also increase due to greater use of electric cars and low-carbon heating. In the USA alone, the electricity grid must be expanded by at least 60% by 2030. Based on historical developments, this is equivalent to a century’s work to be completed in less than a decade.
Power grids are the backbone for the delivery of electrical heat and transport – the glue that holds our energy system together. Again, planning and approval is a major reason for the delay so far. Regulators overseeing energy grids around the world are increasingly recognizing the need to be more agile, far-sighted and willing to accept investments without regret – but there is still room for improvement.
Green Hydrogen
This fuel, which is key to decarbonizing key parts of heavy industry and the transport sector, has been a hot topic of conversation. Now is the time to take meaningful action to scale up the use of renewable hydrogen – the only truly sustainable type (and increasingly competitive compared to blue or gray hydrogen made from fossil fuels).
In order for green hydrogen to help sectors such as ammonia or methanol production to decarbonize, a level playing field must be created. Green hydrogen is currently more expensive to produce (from renewable energy) than gray hydrogen (from fossil fuels). However, gray hydrogen is associated with high CO2 emissions and makes us dependent on fossil fuels.
innovativeion
The importance of innovation at scale to drive the optimal use of renewable energy, grids, electric vehicles and energy storage systems cannot be overstated. At Iberdrola, we recently announced our plans to double innovation spending by 2030.
Encouragingly, the International Energy Agency recently said that global government spending on energy research and development was 5% higher in 2021 than in 2020. This is still not enough. Businesses and governments must remain bold despite a tougher recessionary environment and tightening investment conditions.
Finally, we must keep in mind the long-term price of decarbonization. The year 2022 was marked by short-term, reactive and often unpredictable government interventions in the energy market: confusingly constructed windfall taxes, jangling price support systems and a return to old, polluting technologies in the eleventh hour.
2023 must be different. It is the year we must show leadership, be determined and lead us all on a sustainable path out of a crisis caused by over-reliance on fossil fuels.
To protect citizens and our economies in the years to come, we must use better judgment rather than luck.
Ignacio Galán is the CEO of Iberdrola.
The opinions expressed in Fortune.com comments are solely the views of their authors and do not necessarily reflect the opinions and beliefs of wealth.
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