Europe should abandon the illusion of full energy independence and focus on strengthening the stability of energy supply chains through a more diversified energy portfolio, developing all types of energy and removing barriers to investment. At the same time, domestic oil and gas production, where it can be carried out on a cost-competitive basis and at relatively low social and environmental costs, should be considered as part of a broader energy portfolio.
Kenneth Medlock, Senior Director of the Energy Research Center, said this in an interview with GuildHall.
– What steps can Europe take to achieve energy independence?
– Energy “independence” is a myth. (1) Even if a country is completely electrified, in no way can it do so without inputs in various parts of its supply chain without relying on something that is imported. And (2), even if a country is a net exporter of energy, it is still connected to global markets and, therefore, is not completely shielded from risk. But countries trade because there are long term economic gains from doing so, even if hegemonic motivation drives occasional disruption. Hence, it is much better to approach this as “resilience” in energy supply chains. Efforts to achieve independence will undermine resilience because it inevitably leads to relying on fewer options in the energy portfolio. The most effective way to achieve resilience is through building a diversified portfolio of energy options with spare capacity, or redundancy, intentionally built into the system. In Europe, an abandonment of hydrocarbon development has made the energy portfolio less diverse, more capital intensive, and less resilient. This manifests in many ways, including being overly reliant on a single source of imports for the decade-plus leading up to 2022. If energy supply chain resilience is truly the goal, removing constraints on energy development, of all forms, should be prioritized. After all, there is no economic model where constraints lower costs. (As an aside, I wrote a short paper on this last September).
– What changes to energy policy priorities should be made by the EU to strengthen energy independence in the coming years?
There should generally be an emphasis on policies that promote private sector capital investment. This includes harmonizing regulatory architectures and market designs across countries and removing cost barriers to profitable investment. Government actions and policies are never a panacea, and they have never been able to achieve goals like energy supply chain resilience without private sector capital input. When government policy facilitates private sector investment, it tends to have a much larger multiplier effect in terms of its impact toward the stated goal.
– How do you view the idea of boosting domestic oil and gas production in Western countries, especially in terms of its potential impact on defense capabilities?
– If domestic oil and gas production can be done in a cost-competitive way at reasonably low social and environmental cost, then it should be part of the energy portfolio. Not every country has the ability to do this, however, so also developing deeper infrastructure connectivity throughout Europe can help achieve greater scale and greater diversification across the European energy landscape.
Exclusive to Guildhall.
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