Support for Energy Storage Is Needed to Prevent the Next Energy Crisis

January 21, 2022
Aliaksei Patonia
6 min read
Photo credit: Nutthapat Matphongtavorn / Shutterstock.com
While the current energy crisis in Europe is yet to end, despite some minor fluctuations, the prices for natural gas still show no sign of any dramatic drop back to the levels of 2020.

On the contrary, falling temperatures, fears of disruption from the military buildup on Russia’s boarder with Ukraine, and the reverse gas pumping from Germany to Poland through the European segment of the Yamal-Europe pipeline have all contributed to new historically high prices. The ICE Futures Europe price per thousand cubic meters exceeded $1,000 in September and $2,000 on December 2021. This spike has taken a toll as energy-intensive companies, such as those from the steel industry, had to cease their activities due to the extreme cost of production. While some EU lawmakers accuse Russia of “weaponizing” gas supplies and President Vladimir Putin blames Germany for reselling gas to Poland, soaring prices threaten to leave millions of households unable to pay their bills.

A rapid shift to renewables alone is unlikely to bring the expected results.

Though this is due to several factors, European Commission President Ursula von der Leyen has admitted that Europe is “too reliant on gas” and that “a speedy transition to clean energy would also make the bloc a more independent global player.” While she is broadly right, a rapid shift to renewables alone is unlikely to bring the expected results.

Support of Renewable Energy

While the power of water and wind has been in use for centuries, it was not until 1980 and 1993 when the world’s first onshore wind farm and the first grid-supported solar system were completed in the United States. Although Europe slightly lagged behind, it pioneered offshore wind projects in Denmark in 1991. Since then, these two types of renewables—solar and wind—have undergone a huge transformation with their costs decreasing the level at which they can now successfully compete with fossil fuels. Between 2009 and 2019, the price of electricity from solar declined by 89 percent and that from onshore wind by 70 percent. Apart from the obvious technological progress, the learning-by-doing process, and the economies of scale, this price drop was possible greatly due to supportive government policies.

The start of the European Union’s support to renewables is normally associated with the 2009 Renewable Energy Directive, which first made renewable-energy targets binding for all the member states. While, due to geographical limitations, many other forms of renewable power (such as hydro and geothermal) have received significantly lesser attention, the progress in solar and wind technologies and businesses has been spurred primarily by feed-in tariffs, auctions, and tenders, fiscal incentives, and direct subsidies. As a result of these policies, such energy-transition champions as Denmark and Germany have almost transformed into renewables superpowers—in 2020, they produced around half of their electricity from wind and solar.

When Solar and Wind Fail

While building up wind and solar capacities is the right thing to do, if the global community wants to reach net zero carbon by mid-century, this will not be sufficient. Since solar and wind energy sources do not constantly produce electricity, they tend to either undersupply or oversupply the energy system. For instance, when some days are so windy that the power flows from wind parks overwhelm the electrical grid with excess power, grid operators are forced to pay customers to take the electricity to prevent the collapse of the power system, since the electricity grid has to be balanced at all times. For instance, in 2020, Germany had 128 hours with prices in the red. This means that for more than five days the renewable electricity producers of the country were actually a problem rather than a solution to the challenge of sustainable energy management.

At the same time, with climate change accelerating weather instability, windy days are more often followed by periods of still air, which does not allow wind farms to generate enough power to supply the system. For example, in the first half of 2021, Germany was not able to meet its expected wind-power production targets due to unusually still air. As a result, just like in most other countries, the system had to be balanced with conventional fossil fuels power plants. In the case of Germany, those were coal-fired plants, the phasing out of which the country has long advocated.

Need for Energy Storage

As seen, operating renewables in a sustainable and balanced way often appears to be easier said than done. It is even more problematic to do, if one has to meet net zero carbon targets, as the usual way of balancing the over- or underperformance of renewables through power generation by combusting fossil fuels such as coal or natural gas will not be acceptable then. That is why, in such circumstances, applying energy-storage technologies that would allow for large volumes of electricity to be preserved over a long time and, preferably, in a transportable form seems to represent the only way out.

It unlikely that both energy-storage options will gain the respective scale and be fully competitive with fossil fuels within this decade without additional policy support.

At the moment, the only suitable storage options that would combine these scale, time, and transportability features are either electrochemical (batteries) or “green” chemical storage options (electrolysis-based ‘green’ hydrogen and ammonia). While both are currently being developed by business, some governments have already realized their importance for the future of their energy industries. For instance, having considered its immense solar-power potential, Australia announced the construction of the world’s biggest battery storage project. The EU has declared its intention to invest $430 billion in renewables-based “green” hydrogen by 2030.

Though such initiatives are extremely important, it unlikely that both energy-storage options will gain the respective scale and be fully competitive with fossil fuels within this decade without additional policy support. This means that, if no fiscal, regulatory, and financial assistance is provided to sustainable energy-preservation projects, regions like Europe will still be very much vulnerable to energy crises similar to the current one for a long time. This policy support, in turn, will facilitate the faster commercialization and buildup of large-scale, long-term power-storage technologies, and thus make the process of balancing renewables available before 2030. That is why, when the current energy crisis is over, policymakers in Europe should focus on supporting not only renewables, but also energy storage if they do not want to face another one in the foreseeable future.

Aliaksei Patonia is a visiting research fellow at the Oxford Institute for Energy Studies and a ReThink.CEE fellow at the German Marshall Fund of the United States.

An earlier version of this article, titled “What should energy policymakers do after the current energy crisis is over?”, was published by Apolitical on November 4, 2021.

About the ReThink.CEE Fellowship

As Central and Eastern Europe faces mounting challenges to its democracy, security, and prosperity, fresh intellectual and practical impulses are urgently needed in the region and in the West broadly. For this reason, GMF established the ReThink.CEE Fellowship that supports next-generation policy analysts and civic activists from this critical part of Europe. Through conducting and presenting an original piece of policy research, fellows contribute to better understanding of regional dynamics and to effective policy responses by the transatlantic community.