In this episode of the MyEnergy2050 podcast, we speak to Breffni Lennon and delve into the social dimension of our energy transition. We discuss both the research process itself and how research sheds light on the plight of people regardless of their socio-economic background. Is burning coal for heat as bad as someone flying to Mexico for vacation?
About the AuthorDr. Michael LaBelle is an associate professor at Central European University. He holds a joint appointment between the Department of Environmental Sciences and Policy and the Department of Economics and Business. He founded the MyEnergy2050 website to change how we communicate and implement the energy transition.
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By Michael LaBelle — 2 months ago
This week we speak with Aaron Perry, a senior associate in Valuation and Risk Analytics at Resurety. We discuss the role that long-term and short-term weather forecasting plays in reducing financial risks. Aaron is a climatologist and takes a long-term view on the impact weather has on renewable energy, like wind and solar.
Aaron explains the market impact of weather in an age of weather-dependent technologies impacts the price in power markets. There is a strong need to predict the output of renewable facilities. This means the owners can ride the peaks and troughs of power markets and weather conditions. In short, there is a great need to do portfolio management of assets to ensure these are profitable.
To be honest, it is a bit hard for me to summarize our discussion in some clear points. As you’ll hear, as the episode progresses, we get more and more exact in the language we use to describe the impact of weather on the power markets. There is a reason for this. The complexities behind financing renewable energy is not down to just money to build, but also to ensure long-term operations are profitable. Combine the finances with the complexities of the power market, and the complexities of weather prediction, and you get into the complexities of what we discuss today. It is just very complex. But it boils down to making sure renewables are producing at maximum output, and are also able to sell this power into the market.
Towards the end of the interview, we get into the role of hedging. Hedging, while it sounds like a risky term, as Aaron explains, actually just shifts risk exposure from those that don’t want it to those that do want it. I think you’ll find this informative to understand the complexities of renewable financing. In my interpretation, one of the biggest barriers to renewables, besides technological, is financial risks. This is why I find today’s episode so important. If we find ways to reduce financial risks, or even lower the cost of operations for renewables, more renewables can be deployed.
In short, the ability to ensure renewables are not-loss making means more fossil-free technologies can be deployed. Taking into account the impact of weather on the price of electricity means the energy transition can progress.
By Michael LaBelle — 5 days ago
This week Michael LaBelle provides a rough description of why the EU has lost its soft power.
Rising gas prices, the military aggression of Russia, and rule of law breaches in former Communist states are heralding a new era for the EU. This ‘post-acquis’ era is marked by rising nationalism and populism which undermine the foundation of the EU’s soft power.
The question that needs to be answered is, ‘Why did the EU lose its soft power?’ This question cannot be answered without including the hard power of NATO.
The Post-Cold War environment saw NATO’s eastern expansion, which is now questioned by the hard military might of Russia. The expansion of democracy in former communist countries, once represented by EU membership, represents a new socio-political system expressing soft power. At the same time, the hard power of NATO also went East. Jointly, these institutions now are perceived to threaten the borders and sovereignty of Russia.
The EU has been slow, and even incapable of acting against its own member states who have discounted the democratic norms which are the foundation of the European Union. The EU’s soft power derives from a descriptive cultural experience of individual liberty and respect for human rights. The Cold War-era institutions of the Helsinki Commission, European Court of Human Rights, and others symbolize a common pursuit of both the Soviet and Western countries to establish common rights within Europe. Now, these institutions are sidelined as nationalists and populists reclaim sovereignty given over to these Cold War institutions, including the EU.
The EU’s Single Energy Market (SEM) was built and functioned as a place for companies and governments to ‘come and play’ (as Goldthau and Sitter state). Money could be made by neighboring countries selling gas and electricity by the rules within the SEM. However, over time, as competition and neoliberal rules took over from national governments’ long-term agreements with Russia, participation in the EU’s SEM was not a favorable place to play.
Gas is now near-enough, thanks to LNG and new pipelines, a global commodity. Russian gas is breaking the Soviet gas bridge and finding alternative buyers. For most companies and countries wanting to play in the SEM, there are other places to sell their gas. During the Cold War, gas was more than a commodity, it was a tool to build relations between the Soviet Union and Western (and even Eastern) countries. And to transfer money and technology. This was soft power at play. The Western European countries were attractive for their cash, knowledge, and business relations that could be developed over time (as described by Thane Gustafson in his book, The Bridge). Thus, gas, while a commodity was also a relational tool creating trust and commerce between two different political-economic systems.
The downgrading of gas to a mere commodity overseen by market rules and regulations favoring consumers, means producers are no longer incentivized to participate in a market that has strings attached. The SEM is described by scholars Goldthau and Sitter, as a soft power tool with a hard edge. Meaning the market is attractive to foreign and domestic entities who will play in the market, but there are hard rules and regulations which dictate how participation is done. For Russia in 2021 and 2022, participation is defined as satisfying contractual commitments, but not sending higher levels of ‘free’ gas to participate in the market.
The EU’s soft power is also undermined from within by member states. The growth of populism and nationalism delivers scathing blows against the legitimacy of the European project. NATO was a product of the Cold War – expressing hard power. But the EU is a product produced from World War Two seeking stability and being founded on a common platform of not only economic union, but also political and social union to prevent war between European countries. Therefore, the EU cannot be defined only through rules, regulations, and legislation, but through social and political norms that perceive democracy and individual liberty as foundational to society.
Breaches of the rule of law perceived to be happening in Hungary and Poland, and staggered efforts by the EU to reclaim a semblance of democratic norms in these countries, demonstrates an overly prescriptive governance system unable to have soft social and political norms genuinely accepted by these governments. For these two countries and others, negating the acquis that guided their EU membership by conforming legislation and social systems to an EU norm, meant sacrificing Communist practices of non-market economies and social control. Clearly, these historical practices have not disappeared.
In a post-acquis era, returning to Communist top-down political management appears to be the best way to deliver low-cost energy and societal control. There’s little space for fair elections or expression of individual rights. While the hard power of Russia may not appeal to the Polish government, the nationalistic and populistic tendencies are a return to a form of governance that the parties in power in both Hungary, Poland, and Russia appreciate. And, depending on how you count, over fifty percent of voters support this form. Legitimacy from the ground-up or from the top-down? For nationalists, there is no question. Why should the state be second to a multilateral governance organization preaching liberty with high energy prices? The soft power benefits that attract all three of these countries to the EU, whether the SEM or development funds, is not enough for them to give up historical practices of a nationalistic sovereign state.
The soft power of the EU, to be attractive while also persuading partners to be democratic and neoliberal in commerce is lost. The built-up EU institutions and mechanisms, seen in the SEM or the European Emission Trading System (ETS) provide stringent rules and regulations, not all member states are willing to abide by. Add to that democratic norms, such as respect for press freedom, then membership to the EU has a high cost.
Unfortunately, for the EU, holding soft power, means you can’t kick out those that do not play by your rules. But they can choose to leave. Russia (and the UK) decided they are better off not playing by the EU’s rules. For Hungary and Poland, they decided it’s better to stay in but pay no attention to the rules. For the EU, to build back its soft power, some hard power could be useful.
January 13, 2022
By Michael LaBelle — 5 months ago
This week Michael LaBelle is providing a link with the Sustainable Development Goals and the changes we are making to our energy system. Why is this important? Climate change is altering both how we live and the natural resources we rely on. From water shortages, phasing out fossil fuels to the race for rare Earth minerals for fueling the energy transition. How we utilize natural resources is changing not only how we heat our homes, but what powers our cars. The impact – as I will discuss today – is on adapting our energy system to ensure a sustainable development path is built.
The topics that are addressed are:
- Decoupling Energy and Development
- Energy and Sustainable Development
- Energy and Humane Development
The work and these reflections stem from collaboration between Professor LaBelle and with Professors Tekla Szep and Geza Tot. There are different publications coming out over the next year or so on these topics.
Essentially there are two different perspectives on the energy transition we are developing. One lens provides a view through linking the Human Development Index with energy consumption and the second lens links the Sustainable Development Goals with energy consumption. Taken together, as Professor LaBelle outlines today, we reach a deeper understanding into ‘energy well-being’ which defines how our economies grow while delivering the benefits of economic development to people.
Remember it is the energy system that serves humanity, not humans serving the energy system. The energy transition must be about a fair and equitable readjustment for all of society.