Renewables are making Europe energy-poor

Mark Milke and Ven Venkatachalam, Financial Post, November 3, 2021

With the recent rise in the price of natural gas in Europe to five times where it was earlier this year, expect to see many more Europeans, including Brits, plunged into “energy poverty” — too poor to pay their utility bills on time and/or keep their homes adequately warm.

Why is not hard to grasp: from Greece to Great Britain and everywhere in between, the European electricity grid is increasingly de-linked from reliable, affordable fossil fuels and hooked up to more expensive and intermittent wind and solar projects. When wind and solar are not available, Europeans and others end up chasing the same supplies of oil, natural gas and coal, pushing their prices dramatically higher.   

Canadians should pay attention. What Europeans are already enduring and will suffer through again this winter will only intensify thanks to government efforts at COP26 this week to mandate an even faster “phaseout” of fossil fuels.

But existing policies were causing substantial energy poverty in Europe even before the price spike this autumn. Stephen Bouzarovski, a University of Manchester professor and chair of an energy poverty working group, estimates that pre-pandemic, 80 million Europeans were already struggling to adequately heat their homes. Meanwhile, at least 12 million European households were in arrears on their utility bills.     

The European Union has attempted to provide an objective measurement of the problem but its best data is six years old. The EU Energy Poverty Observatory’s most recent estimate — from 2015 — showed that 16 per cent of EU consumers faced a “high” share of energy costs, with “high” defined as energy expenditures relative to income that were more than twice the national median.  

To get a better sense of the challenge faced by European households and energy poverty, we used 2008 as a start year and then compared the rise in household median incomes (with the full set of data ending in 2019) with the rise in electricity prices (ending in 2020) in 30 European countries.

We found that in lower-income European countries that have seen strong growth in incomes since 2008 (mainly ex-communist states such as Estonia, Bulgaria and Poland), median incomes rose faster than power prices.

Not so in many richer European countries, however. For example, though median household income rose just 19 per cent in France, electricity prices were up 61 per cent. In the U.K income rose just 14 per cent, compared to a 51 per cent rise in electricity prices. In Ireland, income was up 11 per cent, electricity 48 per cent. Worst off was Spain, where median household income rose by just eight per cent, while electricity prices soared 68 per cent.

The response of some European governments has been to subsidize utility bills — as in Ontario, which did it to mask the effect of policies that drove the province’s electricity prices dramatically higher. All that does, however, is shift the burden of high power costs from the “consumer pocket” to the “taxpayer pocket.” But, of course, both pockets are in the same coat: so, either way, households bear the cost, or their children and grandchildren do if today’s utility bills are subsidized through government borrowing.

Why electricity is so costly in the EU and U.K is clear: policy. Governments there have attempted to “transition” from fossil fuels despite their superior energy density — their “power punch” as Vaclav Smil, retired environment professor at the University of Manitoba characterizes it — vis-à-vis renewables.

The result can be seen in the declining share of fossil fuels in EU electricity production: from about 50 per cent in 2000 to 38 per cent in 2019. Nuclear-generated electricity, which has also been discouraged, has declined from 32 per cent of electricity production in 2000 to just over 26 per cent in 2019.

Meanwhile, renewables have more than doubled as a share of EU electricity production, from just over 16 per cent in 2000 to over 34 per cent in 2019. That would be fine, except solar and wind are not exactly inexpensive. They are also not as reliable as fossil fuels, something Brits were recently reminded of when wind power dropped and coal again had to be used to prop up their country’s electricity grid.   

It’s been said that the definition of insanity is “doing the same thing over and over again and expecting different results.” The policymakers gathered in Glasgow evidently want to speed up the killing of fossil fuels even though it has already led to widespread energy poverty in Europe. Are they expecting different results?

Mark Milke is the former Executive Director-Research, with the Canadian Energy Centre and Ven Venkatachalam is the Senior Research Analyst with the Canadian Energy Centre, an Alberta government corporation funded in part by taxes paid by industry on carbon emissions. They are authors of Energy Poverty in European Households: An Advance Lesson for Canadians. Image credit: Pixabay.