By funding the Trans Adriatic Pipeline (TAP), the European Investment Bank (EIB) is hardly signalling to the private sector that governments are committed to a green energy transition, writes Aled Jones, Professor and Director at the Global Sustainability Institute of Anglia Ruskin University. Article courtesy The Conversation.
Over the past few years there has been exponential growth in clean energy investment – while fossil fuel assets are increasingly considered to be risky. Yet, on February 6, the European Investment Bank, the EU’s long-term lending institution, voted to provide a €1.5 billion loan to the controversial Trans Adriatic Pipeline (TAP).
The TAP is the Western part of a larger Southern Gas Corridor proposal that would ultimately connect a large gas field in the Caspian Sea to Italy, crossing through Azerbaijan, Turkey, Greece and Albania. And while gas might be cleaner than coal, it’s still a fossil fuel.
So how does the EU’s support for this major project fit in with its supposed goal of addressing climate change?
Controversial message
A key problem is the message this sends to the private sector, where renewable energy is increasingly seen as a good investment. Technologies once perceived as too risky and too expensive are now delivering worthwhile returns thanks to reduced costs and breakthroughs in energy storage. The price of electricity generated by solar, wind or hydro is now comparable with the national grid. Over the past decade, investor meetings have shifted from discussing whether the transition to a low carbon economy will start before 2050, to whether it will be completed in the same period.
One issue facing policy makers is how to influence investors away from fossil fuels and towards renewable projects.
But there is still not enough money being spent on renewables. While clean energy investment in 2017 topped US$300 billion for the fourth year in a row, this is far short of what is needed to unlock the technology revolution necessary to tackle climate change. There is clearly a gap between what is required and what is being delivered.
The private sector will continue to invest significant capital into energy projects over the next few decades, so one issue facing policy makers is how to influence investors away from fossil fuels and towards renewable projects. To really scale up investment into renewable infrastructure, long-term and stable policy is required – which investors see as clearly lacking.
By funding the Trans Adriatic Pipeline, the EU’s investment bank is hardly signalling to the private sector that governments are committed to a green energy transition.
In just a decade or two, super-cheap solar and wind power could mean that gas pipelines such as TAP would no longer make financial sense.
If Europe really was to follow through and successfully switch to green energy – and such a transition is partially underway – then the pipeline project may even represent a risk to public finances.
Investment risks
Studies on climate change point to the need for a greater sense of urgency and ambition and, to stay within its “carbon budget” under current agreed emissions targets, the EU needs to be fossil fuel free by 2030.
So any large oil and gas infrastructure projects with investment returns beyond 2030 are saddled with risk. In just a decade or two, super-cheap solar and wind power could mean that gas pipelines such as TAP would no longer make financial sense and would become worthless “stranded assets”. Yet TAP backers are touting economic benefits for countries such as Albania extending to 2068 – well beyond the date when Europe must entirely ditch fossil fuels.
Abundant natural gas is also highly likely to delay the deployment of renewable technologies.
The EU’s official stance is to hail natural gas as a cleaner “bridge fuel” between coal and renewables. But high leakage rates and the potent warming impact of methane (the primary constituent of natural gas) means that the Southern Gas Corridor’s climate footprint may be as large, or larger, than equivalent coal. Abundant natural gas is also highly likely to delay the deployment of renewable technologies.
For the first decade of this century Europe prided itself on leading the political debate on tackling climate change. Now, it appears to be losing its boldness. To drive through a new technology revolution, the public sector needs to lead from the front and take bold decisions about its energy strategy.
A gas pipeline is not a technology of the future. If California can release YouTube videos describing the importance of considering stranded assets during this energy transition, and New York City can announce plans to divest from fossil fuels, then maybe it is time for the EU to turn off the TAP.
Editor’s note
The Conversation and is republished here with permission from the author and publisher.
Professor and Director at the Global Sustainability Institute at Anglia Ruskin University. This article was first published on[adrotate banner=”78″]
Wim Turkenburg says
The author – and Energy Post- seems to deny the potential of natural gas use combined with (almost) zero emission of CO2. One approach would be the conversion of CH4 to H2 combined with capture and storage of CO2 (CCS). Another approach could be oxyfuel combustion of CH4 combined with CCS. And the Allam cycle combined with CCS might create new opportunities to generate electricity from natural at high conversion efficiencies and (almost) zero CO2 emissions.
Karel Beckman says
CCS is not the subject of the article. No one is “denying” anything. If you want to make the case for gas with CCS, be our guest.
Wim Turkenburg says
In the article a.o. the following statement is made: “to stay within its “carbon budget” under current agreed emissions targets, the EU needs to be fossil fuel free by 2030”. Probably the author means that Europe should achieve ‘zero emissions’ by 2030 [Remark: I would say in 2040, especially in the power sector]. Whether this also means that we need to be ‘fossil fuel free’ depends on the development and application of CCS.
Globally the potential for save storage of CO2 in the underground is estimated to be at least 2.000 GtCO2. This enhances the ‘Carbon budget’ c.q. reduces the ‘stranded assets’ of fossil fuels.
In conclusion CCS could contribute to solve the climate change problem as agreed upon in Paris, but also enhance the reliability of energy supplies while staying ‘well below 2 degrees’.
Bas Gresnigt says
CO2 isolation and safe storage underground is not only expensive, it also resembles very slowly exploding legacies which our next generations have to handle. Just as with safe underground nuclear waste storage.
And the unthinkable does occur, as demonstrated at Asse in Germany where safe storage of nuclear waste 600m underground turned into an extremely expensive problem as the stable isolating casks and salt started to leak radio-activity within ~25years. So now all has to be recovered to above ground. An extremely expensive operation.
A decent generation doesn’t leave such time bombs for its grand-/grand-children.
Wim Turkenburg says
Storing CO2 in the underground is completely different from storing nuclear waste. Saying the (un)safety is comparible is scientifically unjustified. On earth there are many natural CO2 field in the underground without creating safety problems. And nearly all natural gasfield also contain CO2, ranging from about 0 up to nearly 100%; also without safety problems. And if some CO2 (eg. 0.01%) would disappear from the storage field by leakage it is also not a safety issue (as we know from natural CO2 field in the underground). Note also that we are leaking constantly CO2 from cars, industrial plants etcetera by burning fossil fuels without safety problems.
Bas Gresnigt says
Yes, the (un)safety is not quite comparable (no real tests). However, without danger is not true.
Remember the CO2 below Lake Nyos in Camerooon which killed ~1700 people when it came to the surface ~30years ago?
Other CO2 underground storage situations are also not without health risks…
Why use risky CCS as there is no need with the migration of electricity/energy production to renewable+storage (a.o. PtG for seasonal storage which the Germans are developing fast)?
Especially since CCS is far more expensive…
wim turkenburg says
Two remarks:
1. We can’t achieve 100% renewables within about 25-30 years, which would be needed to stay ‘well below 2 degrees’. Consequently also other options should be developed and applied, especially using fossil fuel with no or very low CO2 emissions.
2. CCS is less (!) expensive than most other energy supply options. Recently the Environmental Assessment Agency of the Netherlands (PBL) presented for NL the following figures for the year 2030:
a) Electricity production:
– Wind offshore: 100-180 €/tonCO2
– Solar-PV: 130 €/tonCO2
– Green gas: 330 €/tonCO2
– Nuclear power: 95 €/tonCO2
– CCS gas-fired power plants: 75 €/tonCO2
b) Industry:
– Biomass: 140 €/tonCO2
– CCS refineries: 50-90 €/tonCO2
– CCS process emissions and steel production: 0-50 €/tonCO2
c) Built environment:
– Solar-PV households: 270 €/tonCO2
– Heat pump households: 630 €/tonCO2
– Heat infrastructure: 250-375 €/ton CO2
Bas Gresnigt says
Check the real costs of CCS as experienced by trials in e.g. USA.
It’s much cheaper and more effective to increase the speed of the transition to renewable!
And it doesn’t leave a risky legacy in the form of CO2 deposits for next generations!
Btw.
Don’t see your huge cost differences of CCS for CO2 generated by wind, solar, nuclear…
wim turkenburg says
Another figure as an answer: IPCC (see AR5) estimated that without CCS the cost of climate mitigation by 2100 would increase by between 29% and 297%. Meanwhile in Paris (COP21) the target was shifted from ‘at maximum 2 degrees’ to ‘well below 2 degrees and striving for 1.5 degrees’, enhancing the need to apply CCS further, in addition to other measures like accelerating the deployment of renewables.
Bas Gresnigt says
Doesn’t change that with the same climate budget, it’s n times more effective to implement more renewable (wind, solar, seasonal storage with PtG, etc).
Why waste limited money for CCS?
Helmut Frik says
Renewables cn be ramped up very fast if needed, and if the political will to do so exists. MAyor point in the deployment of high percentages of renewables is the deployment of a huge, strong grid – huge in continental size, the bigger the better – the existing, but far from being stron enough interconnected eurasian/african grid would be ideal as far as size is concerned, but must become much much stronger – this is a point where the money now sunk in superficious gas pipelines would be spent with much much better results.
Be aware that exchanging gas heating in buildings in germany with heat pumps would free so much gas that all these heat pumps could be run with power generated from gas and all existing coal and nuclear capacities could be replaced with gas power generating as well without importing a single additionla cubimeter of gas at all.
Nturally this would not be a wanted scenario, it is just a numerical example – the same example with improved insulation of buildings reducing the need to heat them and a strong expansion of renewable power shoule accompany the phase ouf of gas in building heating. Resulting in stongly falling imports of gas for germany, making North stream 2 a long piece of scrap metal, and also making a huge part of the other gas grid superficious.
More gas imports are only needed if politics is heading for the wrong direction.
Hans says
Maybe HVDC cables can be drawn through the empty gaspipes. 😉
Hans says
The publication Wim Turkenburg is referring to can be found here:
http://www.pbl.nl/sites/default/files/cms/publicaties/pbl-2017-nationale-kosten-energietransitie-in-2030-2888.pdf
It is however a policy report, not a scientific report. So there is no explicit info on how the numbers came into existence in the report. It is probably hidden in the references.
Until now all estimates of the growth and and cost of renewables have been too pessimistic, even the ones by renewable energy proponents. Therefore, it is most likely is that the PBL is too pessimistic as well.
Bas Gresnigt says
Thanks Hans!
So the figures from the report that Wim used in his comment above, have nothing to do with CCS…
Bas Gresnigt says
Sorry, I was wrong.
[They] are CCS estimates: “…”
(the costs are uncertain and sensitive to fuel prices as capture, transport and storage require extra energy, it says in Dutch)
Bas Gresnigt says
It is more efficient to use (renewable) electricity and heat pumps for heating. Even houses near the North Cape use that method…
Heat pumps generate ~3times more useful heat/energy than they consume taking heat from outside air or ground.
Combining heat pumps with electricity from wind & solar implies also that no new heat is injected in the atmosphere…
Considering the continued fast price decreases of wind, solar, storage and at a slower pace heat pumps,
that method will become also cheaper than burning natural gas…
Geir says
Paradoxes with EU and member states climate policies are far far far worse the just a gas pipeline https://www.linkedin.com/pulse/critical-need-life-cycle-impact-analysis-climate-geir-vollsaeter Millions of barrels of rain forest palm oil is imported each year, co2 emissions are shifted between countries each year, ETS hasn’t delivered a single GHG project while yielding massive windfalls without requirement to reinvest in renewables. Greenwashing has been enabled as emissions performance standards for power, fuels and products have been rejected, in and out of the EU.
Jens H says
If you want wind and sun to replace the existing mix, you have a choice between coal and gas to guarantee the supply of reasonably priced energy. Saying NO to eerything may not work. Besides, wind is not a sound investment, needing huge subsidies to be built at all, and never profitable.
Karel Beckman says
Huge subsidies no more. You’re behind the curve. See for example the previous articles on our website.
Just-saying says
Reference to the “good example” of the US in the last passages is paradoxical in my view. US has enormously increased extraction of shale gas, leading to high supplies of LNG. This has significantly dropped prices of NG in the US and around the world. Everyone supports renewables, but at the end of the day the most financially viable solution wins, especially when NG has not gained such a bad publicity like coal.
Also speaking about “C’s” in the equation, CCGT’s are also getting more efficient and sophisticated.