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Myths and realities of the green economy
BY: Leonid Savin

Myths and realities of the green economy

On July 14, 2021, the European Commission launched its next package, which includes a wide range of legislative proposals aimed at achieving a net reduction of greenhouse gas emissions in the EU by at least 55% below 1990 levels by 2030.

NOURNEWS - Both the EU and the US, as well as many other countries, have been promoting for quite a long time the topic of ecological energy, which is generated by modern systems from wind and solar generators to underwater turbines that exploit sea tides. This approach is based on the Paris Agreement, according to which it is necessary to reduce carbon dioxide emissions. And recently, green energy has been spurred on by dependence on Russian energy carriers — oil and gas.

On July 14, 2021, the European Commission launched its next package, which includes a wide range of legislative proposals aimed at achieving a net reduction of greenhouse gas emissions in the EU by at least 55% below 1990 levels by 2030.

The revision of the Renewable Energy Directive is part of this set of interrelated proposals. It is expected that the entire package will be adopted and will enter into force by 2023, leaving only seven years for its implementation.

Recently, the European Council also pledged to abandon the EU's dependence on imports of Russian gas, oil and coal as soon as possible, and now the European Commission has been instructed to develop a detailed implementation plan by the end of May 2022. The task is twofold: taking immediate measures for the next winter and for the next 2-3 years (saving energy, diversifying gas supplies, etc.) and taking structural measures by revising the strategy for the period up to 2030, with special attention to reducing energy consumption and investing in low-carbon alternatives, including renewable energy sources.

But according to a study carried out by the French Institute for International Relations, there are significant gaps between the theory of green energy and practitioners. [i] There is a risk of conflict between environmental and climate imperatives, and it needs to be properly resolved through policy consistency, because otherwise it will continue to drag on and lead to disagreements.

To implement the Directive, it is necessary to simplify excessively complex administrative processes and overcome the slow issuance of permits for the commissioning of systems that generate green energy. Further ways are unified workplaces and deadlines, as well as an increase in the number of personnel in the relevant state institutions. Forecasting the needs for connecting to renewable energy networks will also help accelerate the development of the network.

Increasing the scale of renewable energy sources to at least 40% without updating and digitising the entire system will cost citizens quite a lot. A unified system approach should also be enshrined in the system development plans at the European and national levels, and this unified system approach should be applied throughout the package.

Also, policy makers and regulators need to be aware of the costs of delays and the benefits of timeliness in a broader sense, not only when it comes to building infrastructure and new networks, but also when it comes to more efficient use of existing networks. An approach with a set of tools is required that considers the interaction of assistive technologies, including storage, both centralised and decentralised.

Indeed, there are a number of bureaucratic obstacles in the EU for the rapid introduction of green energy. For example, obtaining permits for the construction of onshore wind turbines in Italy takes an average of five years, not six months, as required by law. These delays have reduced the deployment rate to about 200 MW per year.

And this is far from the levels required to meet Italy's target of 70 GW of renewable energy capacity by 2030. The impact on investment is quite obvious: Italy's recent tender for renewable energy sources failed, resulting in only 975 MW being allocated for utility-scale projects out of a total of 3,300 MW proposed.

But in the US, the goals for the production of carbon-free electricity by 2035 are also under threat due to problems with the issuance of permits, when wind energy projects must pass an extensive list of inspections and permits. At the federal level, these include inspections or approvals under a number of laws. Federal agencies take an average of 4.5 years to compile environmental impact reports in accordance with the National Environmental Policy Act. And this is only the first contradiction, which is based on bureaucratic procedures.

Green hydrogen and eco-hybrids

The report of the Global Wind Energy Council defines the role of environmentally friendly hydrogen and Power-to-X applications for deep decarbonisation of industrial sectors and ensuring long-term storage. It is worth noting that according to one scenario, by 2050, a quarter of the world's electricity production will be directed to the production of environmentally friendly hydrogen, which will require about 10,000 GW of wind and solar power.

Over the past year, global interest in hydrogen has increased even more, and more and more countries have announced national roadmaps or strategies in the field of hydrogen. In 2021, more than 30 countries began to develop or publish a hydrogen strategy.

As an example, China released a hydrogen roadmap for the transportation sector in 2016 and named hydrogen energy as one of the most important future industries in its current five-year plan (2021-2025), along with the development of quantum information and the aerospace industry. [ii]

India launched its national hydrogen Mission in 2021 aimed at expanding domestic production of environmentally friendly hydrogen and potential mandates for refineries and fertiliser companies to introduce environmentally friendly hydrogen and environmentally friendly ammonia into industrial processes.

The EU has included “green hydrogen” in its European Green agreement, which was announced in 2020, noting that hydrogen networks are vital for a "clean and circular economy”. [iii]

Wind energy is currently cooperating directly with a number of industrial sectors in order to ensure decarbonisation using environmentally friendly hydrogen as fuel. For example, Vattenfall collaborated with the Swedish steel manufacturer SSAB and the mining company LKAB on a pilot plant for the production of sponge iron using green hydrogen. [iv]

This interaction leads to the emergence of hybrid projects. In general, all green energy gravitates towards hybrids. For example, solar panels are combined with wind generators (since the absence of sunlight or wind separately will inevitably lead to equipment downtime, which will affect energy supplies). But traditional energy is also partly connected with environmental approaches. And this is the second contradiction.

Connection of eco-energy with rare earth metals

Former US Assistant Secretary of State for Global Affairs Aaron Ringel notes that as renewable energy technologies, including electric vehicles, solar panels and lithium-ion batteries, take centre stage, the demand for rare earth metals is growing. But the United States depends almost entirely on imports of rare earths.

Until the 1980s, the United States actually led the world in the extraction of rare earth elements. But a short-sighted shift towards imports has led to the fact that America's domestic mining capacity has dried up. The result is Beijing's current control over the supply of these important resources.

China provides more than 85% of the world's reserves of rare earth elements and is home to about two-thirds of the world's supply of scarce metals and minerals such as antimony and barite. [v]

In 2021, a press release from the US Department of Energy's Office of Fossil Energy stated that the US currently imports 80% of its rare earth elements directly from China, with the rest coming indirectly from China through other countries. The US is completely dependent on imports of 14 of the 35 most important minerals. More recently, it was reported that Chinese companies are already actively engaged in mining Afghanistan. China denies any intention to use the export of rare earth elements as a weapon - unless national security interests are at stake. [vi]

Congress and the administration have recently taken a number of steps to address this vulnerability. For example, the Ministry of Energy is exploring new methods of processing rare earth elements. And Congress is seeking to expand domestic high-tech manufacturing with a legislative package based on the Competition Law in America.

Interestingly, despite the emphasis on a safe environment, America continues to depend on China's decidedly non-eco-friendly mining. Toxic lakes and toxic landfills appear in China simultaneously with the rapid and profitable exploitation of rare earth deposits.

This approach is doubly detrimental to the interests of companies that adhere to strict environmental protection measures in the world. For example, The Metals Company (TMC), listed on the NASDAQ stock exchange, demonstrated the possibility of deep-sea mining of important minerals. The company explored the largest known deposit of metals suitable for the manufacture of batteries on the planet - the Clarion Clipperton zone in the Pacific Ocean. It is now successfully processing key battery metals, including nickel and copper, from deep-sea nodules in such a way that little waste is generated during processing.

However, mining of minerals and rare earth elements is only the first step. To achieve a competitive advantage, it is necessary to cover the entire supply chain, including recycling and disposal.

Although in the US there is an opinion that they can restore their leadership in high—tech production - and do it while protecting the environment. President Biden is supposed to use the Defence Production Act to do this in order to start safe domestic extraction of the most important minerals and rare earth metals. [vii]

In any case, today's extraction of rare earth metals for their use in green energy is the creation of mines and quarries, which clearly does not fit into environmental approaches. This is the third contradiction. And the fourth is the problem of recycling the same wind turbines or solar panels. There is no green technology for this yet.

Contradictions in the EU

But even with the intensification of the construction of new wind farms and solar farms, additional contradictions arise. This is one of the most inconvenient questions of our time, since the answer necessarily includes references to the prices of copper, steel, polysilicon and almost all metals and mineral goods. In addition, the construction of these facilities takes time, more time than, for example, switching to LNG (if you have import terminals) or coal.

And in the recently published plan to reduce the consumption of Russian gas - as well as oil and coal - the European Commission made a big bet not on wind and solar energy, but on more gas and coal.

This is the same Europe that planned to shut down all its coal-fired power plants by 2030 in order to meet the Paris Agreement's emissions reduction goals. The same Europe is also betting on the replacement of natural gas with fuel oil to replace another 10 billion cubic meters of Russian gas.

In total, the European Commission seems to be planning to replace more than half of its Russian gas consumption with other fossil fuels. For comparison, it is expected that the share of wind and solar energy in the replacement of Russian gas will be about 22.5 billion cubic meters, while 10 billion cubic meters will come from wind energy and 12.5 billion cubic meters from solar energy. But this is not so much for a region that aspires to become the greenest on the planet in the shortest possible time.

Thus, it seems that the reality of energy supply and consumption is reasserting itself, as the EU finds itself in a gas crisis. If its plan involves much more fossil fuel consumption, then fossil fuels should be easier - and faster - to extract and possibly cheaper than wind and solar. Otherwise, why choose them instead of renewable energy sources? [viii] This is the fifth complex contradiction.

Promising projects

With the development of alternative energy, the question of its redistribution naturally arises. It is assumed that underwater electric cables may be used more often as governments move their energy strategies towards renewable energy sources. When countries develop their wind and solar energy, there will be more incentives for the construction of underwater cables that can facilitate the distribution of electricity between regions.

It is already planned to lay the first of many new major cables between the UK and Germany at an estimated cost of $1.95 billion. The NeuConnect project will allow the transmission of 1.4 GW of electricity to and from the two countries via underwater cables covering a distance of more than 450 miles. The project was called the “invisible energy highway” that allows the distribution of electricity between the UK and Germany. [ix]

Key contracts totalling more than £1.5 billion ($1.95 billion) have been awarded for a major interconnector project that will link Germany and the UK as countries around the world try to strengthen their energy supplies amid the ongoing crisis in Ukraine.

The NeuConnect project is centred around underwater cables that will allow the transmission of 1.4 gigawatts of electricity in both directions between the UK and Germany — the two largest economies in Europe. The length of the interconnector is 725 kilometres, or just over 450 miles.

The cable will run from the Isle of Grain in Kent in England to the German region of Wilhelmshaven, crossing British, Dutch and German waters. After construction, it will be able to provide electricity to 1.5 million homes.

The approved contracts include work on laying cables and converter stations, with both Siemens and Prysmian winning contracts to work on the project. Siemens will supply a high-voltage direct current transmission system (HVDC), while the Italian cable manufacturer, Prysmian Group, will lead the design, manufacture, installation, testing and commissioning of the NeuConnect interconnect.

Construction is expected to begin this year, allowing the UK to “tap into Germany's extensive energy infrastructure, including its significant renewable energy sources.” In addition, “the new link to the UK will help eliminate the current bottlenecks where wind turbines are often shut down due to the excess of renewable energy generated.”

The NeuConnect consortium, led by Meridiam, Kansai Electric Power and Allianz Capital Partners, has been discussing this development for some time, but sanctions against Russia have forced European governments to look for alternative energy sources much faster. In addition to finding alternative sources of oil and gas supplies, several governments are developing strategies to accelerate their renewable energy projects and are even discussing increasing nuclear capacity for the first time in many years.

However, this is not the first underwater cable approved in Europe, as work began last year on a giant underwater cable that is expected to connect the UK with Norway. The 450-mile-long North Sea Link (NSL), worth $1.86 billion, is a joint venture between British National Grid and Norwegian Statnett.

The two countries want to share the hydropower resources of Norway and the wind energy resources of the UK, which will allow each of them to optimise production to meet demand. The National Grid explained: “When demand in the UK is high and wind generation is low, hydropower can be imported from Norway.”

Both the UK and Norway are major players. But Norway claims that 98% of its electricity is generated from renewable energy sources, mainly hydropower. Meanwhile, in the UK, Prime Minister Boris Johnson announced a goal to provide 100% of electricity in the UK from renewable sources by 2035.

And plans for laying underwater cables are being developed not only in Europe, but also spread to different continents. Last year, Greece and Egypt announced that they were negotiating a potential 2 GW underwater connector running across the Mediterranean Sea to connect the countries' power systems. [x]

This will be the first project of its kind linking Europe with Africa, demonstrating a huge potential for expanding interregional ties. And Greece is also considering plans to create a Euro-Asian interconnector that will run from Israel to the Greek mainland via Cyprus.

When completed, the cable will be 1,500 km long, and it will transmit from 1 GW to 2 GW of electricity between regions, connecting power grids throughout Israel, Cyprus and Greece. While early projections suggested that the cable would be completed by 2022, new estimates suggest that it will be completed in 2024 and will cost almost $823 million. The funding will partly come from the EU and will contribute to ending the energy isolation of Cyprus. [xi]

But here again the question of political and technological risks arises when laying such cables and interconnectors.

The Geopolitics of Electricity

All this indicates that the geopolitical importance of electricity has traditionally been underestimated, but with the global transition to more environmentally friendly energy and the expansion of the use of renewable energy sources (“energy transition”), electric grids are becoming increasingly important and gaining momentum.

Beijing, in particular, is promoting the global electricity supply system through its "One Belt, One Road" initiative. The German Institute for International Affairs and Security notes that today the impact of the unification of electric grids on international relations and geopolitics deserves the closest study. [xii]

The study says that the continental Europe-Asia zone (i.e. Eurasia) demonstrates a special dynamic. New configurations of electric power infrastructure – in the form of interconnectors (i.e., cross–border transmission lines connecting networks) and integrated power grids - are rebuilding space, redefining the relationship between the centre and the periphery.

In addition to the old centres of attraction - Russia and the EU - new ones are emerging. These include not only China, but also Turkey, Iran and India. Their networks are not yet as tightly interconnected as in Europe and some parts of the former Soviet Union, but, nevertheless, they are currently planning to connect them. As a result, areas that were once considered peripheral, such as the eastern Mediterranean, the Black and Caspian Sea regions, as well as Central Asia, are rapidly becoming objects of competition.

Electricity is connected to the grid. Electricity moves almost at the speed of light and connects distant points and covers vast spaces in an interconnected network. Electric networks (“infrastructure”) shape regions in the long term, creating their own topography reflecting the organisation of economic and social life within a geographical area. The power supply system is the basis of any economy, and electric networks represent the most important infrastructure.

The interaction of three factors – the electric grid, space and geopolitical power - deserves close attention. Infrastructure networks create techno-political and techno-economic spheres of influence. Since energy spaces extend beyond state borders and beyond legal jurisdictions, they ensure the spread of geopolitical power. The vulnerability of states to the projection of force and external influence also depends on how reliable and stable the electrical networks are.

And the European Community and the European Union have never been identical to the more general concept of “Electrified Europe". The expansion and synchronisation of the network there still primarily depend on economic and geographical conditions. Despite the general political and legal framework, technical and market integration within the EU proceeded very unevenly and with a time delay.

With the creation of the internal market, the EU also sought integration and harmonisation at the political, technical and economic levels. But the corresponding physical nodes and control centres of technical, operational, economic and political power do not overlap either in location or in their organisational structure.

Using the example of rare earth metals, it can be seen that Beijing's policy shows the permeability of spaces and spheres of influence, as well as the degree to which political power can be projected through “connecting links”. The projection of power, carried out through the expansion of power lines and the development of networks, leads to the reordering of large economic spaces. And they are certainly characterised by geopolitical ambitions. In such a volatile regulatory framework, the discrepancy between the levels of interconnection and regulatory approaches raises a number of geopolitical issues.

Electrical connections and networks can serve geopolitical interests in three main ways. Political actors can use them to establish asymmetric dependence; they can use them to establish market dominance, regulatory dominance, and technical and economic dominance; and, finally, they can use them to achieve mercantile goals.

In such situations, a classic example is Karl Schmitt's 1939 work Völkerrechtliche Großraumordnung (The Order of Large Spaces of International Law), namely that there is a link at the level of technical and organisational development between large territories, economic relations and energy and electrical networks.

This is also true for measuring green energy. Despite the stated goals, the West does not have enough assets and resources to implement this global project without the participation of major energy players such as Russia, Iran and China, where each has its own strengths. The same natural gas and nuclear energy can also be considered part of the green economy, the question is from what position to look at these industries.


Geopolitika
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