Filenews 15 November 2020 - By Dimitris K. Konstantinidis, Dr. Economic Geology
In a recent post on my personal website I had indirectly challenged the road map of the Republic of Cyprus in the field of energy. The concern concerned the use of fossil fuels and the various plans for the exploitation of hydrocarbons in the Cyprus EEZ, as opposed to a new strategy based on renewable energy sources ("RES") with a green footprint. In the period between the above post and today, the exploratory review of developments increasingly reinforces this reasoning.
What do the experts say?
The main argument about fossil fuels vis-à-vis RES usually concerns costs. Fossil fuel advocates argue that coal (coal, lignite) is the cheapest form of electricity. Each year, the official International Energy Agency (IEA) confirmed this view. However, this year, it announced for the first time that, in most states, electricity generated by solar photovoltaics (solar panels) is cheaper than coal or natural gas-fired installations.
In short, it states that "for low-cost projects, solar photovoltaics are now the cheapest source of electricity in history". In appropriate locations and with access to favourable support and financing policies (e.g. with revenue support mechanisms such as guaranteed prices), the IEA stresses that solar power can now generate electricity at US$20 per MWh or cheaper, which is significantly lower cost than coal or natural gas.
In addition, the researchers say that if COVID-19 is brought under control by 2021 and energy demand recovers, RES will account for 80% of the increase in global electricity demand by 2030. This means that 8 of the 10 MW of new electricity generation connected to the grid will be from RES. And that, in fact, is a conservative scenario, if governments do not push for more sustainable energy.
What do investors say?
It is well known that the returns of some portfolios are indicative of economic trends and a harbinger of future developments. According to a review of 36 shares of mining, automotive and RES companies listed on various stock exchanges, the 12-month (2 October 2019 to 28 September 2020) performance of 32 of them was positive, despite the pandemic. It is striking, however, that more than ten green energy shares had yields of 100% or more.
The most typical example is Enphase Energy, Inc. (a company active in the clean energy sector.), which two years ago was on the verge of bankruptcy, and now has a stock market value of EUR 11 billion. and a 12-month share yield of 250%.
Speaking of successful shares, it would be a great omission if we didn't make even a brief reference to Tesla, the car industry that is "changing the world." We could argue that before Tesla cars were powered by diesel or gasoline, after Tesla there would only be electric vehicles. Tesla, like other car industries, foresees the future, a future without exhaust gases, no incandescent summers in the Mediterranean and war conflicts over eastern Mediterranean hydrocarbons, which humanity may not need in the future. Perhaps that's why its stock "flew" within a year, from 52 to 440 US$, i.e. its price multiplied by 8.5 times!!!
What do the actions and plans of certain countries say?
- United Kingdom
It is the world's largest offshore wind user. As Prime Minister Boris Johnson said at a recent Conservative Party conference, the country's future energy system will be based on an energy strategy based on offshore wind power, supported by hydrogen and carbon discharge.
Over the past decade, Britain has reduced its greenhouse gas emissions more than any other major economy. From 2010 to 2019, emissions fell by almost a third (i.e. to levels last seen in the 1980s), even though the economy grew by 20%. The country has made a huge change in the electricity mix, from coal to natural gas and wind, because natural gas produces only half of its carbon emissions, contributing to the reduction of CO2 without economic losses. Of course, wind power is even cleaner and has grown even faster.
The UK's lead will be strengthened when the world's largest offshore wind farm, the Dogger Bank (off the Yorkshire coast), launches in 2023. However, the path to the development of wind energy and the removal of fossil fuels will not be so simple. Certain uses of gas cannot, at present, be replaced by wind, solar or other RES. Today, Great Britain uses natural gas, both to support RES and to feed its heavy industry. The problem lies in the expected interruptions of power from wind farms, due to reduced wind intensity in some areas and times.
- Spain
If we want to compare the returns of RES in countries with similar solar and wind conditions such as Greece and Cyprus, then the best example is Spain. According to a recent report by the Spanish company Red Electrica de Espana, this year's res production in the nine months of Jan.-Sept. 80,577 GWh, representing an increase of 16.3% compared to the same period in 2019. Solar photovoltaic energy, whose production increased by 67.5%, was one of the driving forces behind this development, followed by hydropower, which increased its production by 41.6%, and other RES which, despite the lower share in the production mix, produced 20.6% more from January to the end of September than in 2019.
Although electricity demand during this period decreased by 6.6% compared to the previous year, mainly due to the coronae crisis, the truth is that weather conditions, together with the development of new installed renewable power in Spain, have boosted green technologies, which on 30 September accounted for 43.1% of total national production , i.e. 7.5 percentage points more than in 2019.
- United States of America
According to data from the Independent Electricity Transmission Operator (ADMIE) of Greece on Monday 14 September, RES (wind and photovoltaic) covered 51% of electricity demand, which rises to 57% if large hydropower projects are taken into account. This is a national and European record!! Considering that in 2018 the share of RES in the production mix was only 18% and in 2019 32% (Fig 3), this is a rapid increase in the penetration of RES into the energy balance in recent years.
It is also considered certain that this course will continue since: 1) the decision of the Ministry of Environment and Energy of Greece, published in the Government Gazette (Government Gazette B 3291/6 August 2020), simplifies environmental licensing for RES and stimulates investment in green energy, and 2) according to data from the Ministry of the Environment 11,000 applications are pending for the construction of RES units, with a total capacity of 76 GW, i.e. ten times that required to achieve the 2030 target.
- Denmark
As a final example, we will mention Denmark. This country has a strong political commitment to RES, and at the beginning of the year its Parliament confirmed that 35% of Denmark's energy supply will be based on RES by the end of 2020 to reach 100% by 2050. Already today, Denmark covers 22% of national energy consumption with renewable sources. Moreover, in 2019 Denmark broke the world record for the percentage of electricity produced by wind installations (Fig. 4) with a production level of 47%.
As Denmark's vision is to rid the fossil fuel electricity sector as early as 2030, it is developing new offshore wind farms. In this context, on 16 October European Energy SA submitted to the EU the dossiers for the licensing of two new 560 MW parks, known as Omo South and Jammerland Bay. As the company said in a statement, "Our offshore wind farms will provide more than 500,000 households with green energy and will be the key to achieving ambitious emission reduction targets in Denmark and the EU, as it will reduce CO2 emissions by 750,000 tonnes per year."
What European Union lawmakers say
On 12 October, the European Parliament's Environment Committee voted in favour of excluding fossil fuels from the EU's EUR 750 billion recovery fund, intended to boost the Union's economy following the Coronae crisis. The proposed resolution was adopted by a large majority. A final vote is expected during Parliament's plenary session by mid-November.
Pascal Canfin, a French centrist MEMBER who chairs Parliament's Committee on the Environment, Public Health and Social Policy, was the lead author of the resolution. In a Twitter post, he welcomed the result of the vote, stressing that it "paves the way for a real green recovery." He also stressed that there can be "no fossil fuel financing as we invest for the future and not in the past."
It is stressed that the EU Recovery Plan emphasises the building of a greener, more digital and more resilient Europe. The development of diversified, resilient supply chains of sustainable raw materials is part of this strategy. In this context, the EU announced, on 3 September 2020, the European Raw Materials Alliance (ESPY). The espy's vision is to ensure reliable, safe and sustainable access to critical and strategic mineral raw materials and advanced materials and to develop know-how for EU industrial ecosystems. The Alliance will seek to include all stakeholders, such as industrial actors in value chains, Member States and regions, trade unions, civil society, research and technology organisations, investors and NGOs.
The "golden green leaf" should simply turn green
It is obvious that the road map of climate neutrality will initially be achieved by the prevalence of RES at the expense of classic production resources, i.e. in the case of rec. fossil fuels, and over time, with full exemption from them. Most countries aim for this to happen by 2050, with a small number also envisioning 2030.
In Cyprus, the Government, as well as the business and technocratic system, is called upon to commit itself to promoting sustainable development, green energy and innovation so that it can absorb European funds from the recovery package, the new EU tool that provides Member States with financial support to accelerate public investment and reforms in the wake of the COVID-19 crisis. As is well known, Cyprus will receive a total of EUR 968 million from the fund in the form of grants. 37% of these funds should be allocated to climate and environmental sustainability actions, based on green-footprint alternative energy sources. In other words, grants for green development will amount to €350 million.
It is therefore absolutely necessary, as an island in the Mediterranean with so much sunshine, wind and coastal areas turns, through a holistic design, towards RES as soon as possible. Especially when the share of energy used for transport and derived from RES for 2018 was 2.7% for Cyprus and 29.7% for Sweden.
It is time for the theoretical declarations of manifestos, such as "The National Low Emission Development Strategy of Cyprus", to be turned into realistic acts. The "golden green leaf" should simply turn green, after removing the "gold" of the Towers of Limassol, the passports of suspicious investors and casinos. Let us take advantage of the grants and attract serious entrepreneurs who invest in programmes with growth prospects. Ultimately, global market conditions may force us to forget all kinds of hydrocarbons, including natural gas, as well as grandiose projects such as the EastMed pipeline.
