The Role Of Energy

One of the big success stories of modern Danish business is renewables. 2020 was the first year where a majority of electricity used was powered by wind and solar energy. Now, roughly 40% of gross energy consumption is from renewables. With hugely ambitious projects underway like “Energy Island” in the North Sea (which will provide electricity to 800,000 homes) the role of renewables will substantially increase.

These projects are not only hugely beneficial from an environmental point of view, but the geopolitical urgency has become clearer in recent weeks. Denmark’s neighbour and Europe’s largest economy, Germany, has made significant strides in the production of renewables, but natural gas still makes up a quarter of all energy consumption, and 55% of this comes from Russia. Oil is also pivotal, with Russia supplying about a third of its oil.

This places Germany in an obvious bind, given Russia’s invasion of a sovereign country, and the fact its majority state-owned oil and gas companies are pivotal to its finances. Promptly pivoting to alternative suppliers, particularly on natural gas, is difficult. The British and Dutch waters are increasingly depleted. Norway is one of the few European countries with substantial reserves, and it is already operating at full capacity.

Whilst renewables production has increased, Germany’s dependance upon Russia remains, because of an understandable desire to transition from environmentally damaging coal and a phasing out of nuclear energy. This was announced partly due to longstanding safety concerns, and partly following the Fukushima disaster in 2011. Whilst the decision to move away from nuclear was understandable at the time, now may be the time to reassess it. New, interesting, and potentially safer nuclear technology is being tested all the time, and nuclear may be a way to provide alternatives to fossil fuels and dependance upon Russia.

So what should Germany do in its current energy predicament? Well, there is no magic bullet, but it should take this crisis as an opportunity to finally wean itself off dependance upon a troubling regime. It can work on three strands: first, scour the markets for alternative gas providers. This includes liquefied natural gas, and significant infrastructure investments may be necessary. Second, double down on renewables, with huge projects like Denmark is planning. And third, reopen the debate as to whether nuclear power should be part of the energy offering. None of this will not happen overnight, but the imperatives (both environmental and geopolitical) require nothing else.