The smarter way to avoid energy crises: use less

The Scottish island of Eigg has the first completely wind, water and sun-powered electricity grid in the world, according to the Isle of Eigg Heritage Trust.
The Scottish island of Eigg has the first completely wind, water and sun-powered electricity grid in the world, according to the Isle of Eigg Heritage Trust.

LONDON, Sept 24 (Reuters Breakingviews) - Europe’s leaders need an energy intervention. The factors that caused the continent’s gas prices to treble, pushing the cost of electricity through the roof, are not going away. Yet fixing the problem requires finding ways to use less power, not just cranking up other sources.

The current crisis has laid bare the vulnerabilities of countries like Britain and Italy, which rely heavily on imported gas. The United Kingdom could try to avert future problems by speeding up its plans to quadruple offshore wind generating capacity by 2030. But the latest crunch was exacerbated by a period of low wind speeds. Increasing gas storage would be a retrograde step, while developing new ways to store electricity will take time. Building more nuclear power stations would not contribute energy until way after 2030.

An alternative approach is to focus on reducing demand. According to the International Energy Agency, population and economic growth means the world could require well over 600 exajoules (EJ) of energy by 2050. That’s equivalent to 14 billion tonnes of oil, and a hefty increase from the 412 EJ the planet consumed in 2020. Even with vast construction of wind turbines and solar panels, it implies continued use of fossil fuels.

That’s where energy efficiency comes in. The IEA calculates that to limit global warming to 1.5 degrees Celsius above pre-industrial levels by 2050, total energy consumption will have to shrink to 344 EJ. The lion’s share of this near-halving of demand can be achieved by making manufacturing plants, vehicles and in particular buildings use less energy. The single biggest chunk of the reduction is retrofitting buildings, for example by replacing gas boilers with electric heat pumps.

None of these measures will ease the current gas panic. But quick action would at least start to prevent future squeezes. As the IEA points out, improving efficiency is the best way to improve energy security.

Companies like $100 billion French giant Schneider Electric (SCHN.PA) and Italy’s $84 billion utility Enel (ENEI.MI) have major businesses advising companies on how to reduce energy consumption, while asset managers like the UK’s SDCL and France’s Tikehau Capital channel funds to retrofit projects. But governments could do way more to focus attention on efficiency. It’s a more productive alternative to agonising over supply.

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- Britain has not been complacent about the vulnerability of its retail energy market, which is seeing some suppliers fail in the wake of soaring wholesale gas prices, business and energy minister Kwasi Kwarteng said on Sept. 23.

- "We haven't been complacent, the whole point about the supplier of last resort process, which was interrogated last year, is that it's an organised process, well established, which can allow existing strong companies to absorb customers in failure," Kwarteng told lawmakers.

- He said the solution to the crisis would come from the industry and the markets. "Government will not be bailing out failed energy companies," he said.

Editing by Peter Thal Larsen and Karen Kwok

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