No more gas!
The crisis in Ukraine has put energy security (and especially the dependence on Russian gas) on top of the political agenda in the European Union again. However, the EU’s response has been uninspired so far and largely consists of building more gas infrastructure even though demand has fallen for the forth year in a row in 2014.
Large new import pipelines and LNG terminals (Liquified Natural Gas) are part of the the European Commission’s list of priority energy projects (Projects of Common Interest, PCI) as well as its blueprint for energy security(the European Energy Security Strategy).
But investments in gas infrastructure of that scale are not future-proof. They are a waste of money and will have high human rights and environmental costs. Rather than burdening us with useless infrastructure, the EU can choose more realistic, cost efficient and sustainable solutions by lowering energy consumption and generating more energy from renewable sources.
The research and expertise to back up this position is gathered on this page.
Political context – prioritising gas
Fast-track approval – Projects of Common Interest
110 projects in the European Commission’s Projects of Common Interest are related to gas storage or transport – from mega-pipelines between Azerbaijan and Italy and Germany to transforming the harbour of Rotterdam into an LNG hub.
Inclusion on the PCI list means that projects will benefit from the streamlining procedure and the reduction of administrative burdens while obtaining the needed permits.
It also makes it likely they will receive priority funding and public support via the European Investment Bank, the European Bank for Reconstruction and Development, the EU’s Connecting Europe Facility or instruments like Europe 2020 Project Bonds.
Energy security strategy
The ‘Energy Security Strategy’ Communication (pdf) which the European Commission released end of May mainly focuses on new, additional supplies of gas, rather than a plan to reduce the EU’s “high gas energy dependency rates” that the European Council actually called for (pdf).
The new sources of gas the Commission has identified include:
- Domestic sources (shale gas, offshore)
- External suppliers (Norway, North Africa, global LNG Market, Southern corridor, Turmenistan, Iran and Iraq)
Some of the infrastructure to make this possible is included in the PCI list.
The price of gas – 3 times as expensive!
The commission estimates that over EUR 200 billion is needed to build the energy infrastructure of which EUR 70 billion would for gas infrastructure. That is at least EUR 70 billion which are invested unwisely:
Not economically viable – Gas is getting more expensive where other, more sustainable sources of energy are becoming cheaper. Between 2001 and 2012 gas prices tripled. Hopes that European shale gas developments and increased US gas exports will revert this trend seem increasingly unrealistic.
Threatening the climate – Europe is currently consuming three times more gas than it should in 2050 in order to stay within a global warming scenario below 2 degrees Celsius. The planned investments will generate a huge overcapacity – even according the EU Commission’s own forecasts -, locking us in for decades to come and crowding out investments in renewables and the reduction of energy consumption through demand side energy efficiency investments.
Creating new dependencies – The new gas imports will increase our dependence on countries like Azerbaijan, Algeria, Qatar and Nigeria – not the most stable democracies to say the least, and all with a well-documented track record of human rights abuses.
Financial speculation – little to gain for consumers
A worrying aspect of Europe’s dash for gas is the ambition to create a US-style spot market where gas would be traded for immediate delivery, replacing long term contracts with constant price fluctuations and speculation.
The required infrastructure to store and transport large quantities of gas will allow for more flexibility but it won’t bring prices down. On the contrary, in Asia where a spot market is in place prices are 30% higher. And to attract LNG in the spot market it would cost twice as much as what is currently coming from Russia.
A case study: The Southern Gas Corridor
Among the mega-projects supported by the EU, the Southern Gas Corridor stands out as one of the most controversial. Presented as an alternative to Russian energy, the pipeline would tap gas from the Shah Deniz field in Azerbaijan and bring it to the southern Italian shores, where it would be then distributed throughout Europe.
Opposed by civil society since the beginning, the project has raised numerous issues regarding:
- the questionable need for more gas in Europe;
- its coherence with EU’s 2030 energy targets and longer-term decarbonisation goals;
- the involvement of the Russian oil giant Lukoil in the development of the Shah Deniz field;
- the worrying partnership with the repressive regime of President Aliyev in Azerbaijan, as highlighted in a resolution of the European Parliament.
More recently, the debate has focused on the western section of the Southern Gas Corridor, the Trans-Adriatic Pipeline (TAP), for which the European Investment Bank is considering a 2 billion euro loan, the biggest ever granted since the bank was created.
The TAP has faced the fierce opposition of the southern Italian communities that will be affected by the project, worried about its environmental and economic impact on the territory. In particular, the population and the local authorities have expressed concerns about the transparency of the approval procedures by the Italian government and the compliance with pending prescriptions for the Environmental Impact Assessment.
Lastly, recent investigations have highlighted the financial fragility of the Consortium financing the TAP together with its suspicious fiscal accountability, being registered in a renowned tax haven in Switzerland.
For these reasons Counter Balance strongly opposes the financing of the TAP by the EIB and urges both the bank’s Board of Directors and President Werner Hoyer to take full responsibility and deny their support to such a harmful project.
A different energy future is possible
Foregoing these gas projects is not a matter of sacrificing security but of political choices.
Investing in renewables and energy efficiency can generate gas savings of ~ 40%, exceeding all gas imports from Russia. Here is how:
- An ambitious energy efficiency target of 40% for 2030 – as called for by the European Parliament – would result in a ~ 20% drop in annual gas consumption.
- Increased use of renewables, particularly in the heating & cooling sector, could further reduce the EU’s reliance on gas imports by ~ 10%.
- Another 8-15% in additional gas savings can be expected from electricity savings, if renewables continue to increase their share in the energy mix.
The current gas infrastructure should therefore largely suffice to deliver the demand.
Sources and further reading
Why gas is not the answer to EU concerns about its natural gas supply (Food and Water Europe)
No public money for mega-gas pipelines projects (Bankwatch)
Blogs and articles
Energy security for Europe or profit for Lukoil? (09/01/2015)
Livorno (pdf) (RE:Common/CB)
Reinforcing dictatorships (Platform)
Rotterdam gas hub (BE/CB)
Euro-Caspian Mega Pipeline (Re:Common, Platform and Bankwatch)
Kuba Gogelewski: email@example.com (EU energy policy)