EUROPE’S ENERGY CRISIS AND GERMANY’S INDUSTRIAL FUTURE
While we are focussed on the very acute Energy Crisis in Europe, there should be no mistaking that this is a global energy crisis, though one that is being most acutely felt in Europe.
I have been fortunate to attend a lot of energy and commodity conferences this autumn, and the enduring impression is that the crisis is far from over, and will continue to cast a long shadow into 2023, and probably well beyond. There are no quick fixes, and even if energy prices were to retreat to their pre-pandemic and Russia invasion of Ukraine levels on a sustained basis, which no one appears to believe, the crisis has exposed so many fundamental flaws in infrastructure, which will have to be addressed. Any attempts at finding solutions will not only have to be pragmatic, as well as flexible in ways that long-term infrastructure projects are frequently not, and above all include stress testing for very adverse ‘Climate Change’ outcomes, and their impact on societies.
The aim of this article is not to offer any specific insights into how this might evolve, but to examine some of the antecedents, which political and other leaders should take heed of, and then look at the implications for the German industrial complex, aka Deutschland AG. The EU has for many a year talked about energy transition, and even placed it at the very centre of its EUR 807 Bln ‘Next Generation EU’ (pandemic) recovery fund. Leaving aside the significant issues about disputes with the likes of Hungary and Poland over ‘rule of law’ disputes preventing the distribution of funds, the largely failed EU efforts to formulate a common energy policy to put in place measures to combat the potentially ‘worst case’ scenarios this winter underline once more the need for far reaching reforms of how the EU
operates. The most obvious hurdle is that the sources for power supply (electricity generation) vary enormously between countries, for example, France relies primarily on nuclear (71.7%), whereas Germany has a broader mix: 27% wind, 24% coal, 12% nuclear, 12% natural gas, 10% solar, 9.3% biomass, 3.7% hydroelectricity, but as importantly 63.7% of this is imported, above all from Russia. Meanwhile, Poland generates 83% from fossil fuels, with coal accounting for 72%. As with the failure to establish either a fiscal or banking union within the EU, both of which would help to facilitate much needed and heavily neglected infrastructure investment, the failure to find some coordination in energy policy and security terms exposes yet another longer-term threat.
24 | ADMISI - The Ghost In The Machine | Q3 Edition 2022
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