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Debating the future of Europe’s energy supply

AGCS says the energy market is facing a period of dramatic economic, ecologic and technical change and warns of the increasing threat posed by power blackouts and cyber attacks at its Expert Days risk conference in Munich.

 

AGCS brought together leading international experts from 11 countries to discuss the issue of future energy supply in Europe at its recent Expert Days conference.

Representatives from academia, suppliers, power generation and the insurance industry gathered at The Charles Hotel in Munich over the course of two days in order to exchange expertise and experience around the latest innovations in areas such as renewable energies, smart grids and information technology security.

More than 130 leaders in the energy sector also discussed the opportunities and challenges around implementation of the European Commission’s long-term strategy for the sector Energy Roadmap 2050, which aims to not only restructure the energy market in the European Union – in order to reach specific climate targets – but at the same time ensure security of its supply and competitiveness.

The Energiewende Director of the Environmental Policy Research Center and Professor of Comparative Politics at the University of Berlin, Dr. Miranda Schreurs told Expert Days delegates that energy policy across Europe is still “a national matter” despite the best efforts of the European Union, which poses a challenge for Europe to establish common goals.

In Germany, the Energiewende – the term used to describe the planned move by the country towards an era of renewable energy, energy efficiency and sustainable development – is currently changing the risk governance and risk management landscape at a “breathtaking speed”, according to Hartmut Mai, Chief Underwriting Officer, AGCS.

Politicians in Europe's largest economy want renewable power to contribute 35% of the country's electricity consumption by 2020 and 80% by 2050 as part of its clean energy drive.


“Planned transition of the energy supply has triggered the most intense topic discussion, given the massive and radical changes this will have for the next decades and generations to come,” Mai said at the Expert Days event.

“These changes cause challenges not only to politicians, scientists, industry, government, regulators and society but also to the insurance industry in terms of whether it has sufficient solutions.”

Mai said there were a number of issues around energy transition currently occupying insurers, including how such transitions of energy supply will be financed and whether such models are sustainable.

“How will basic energy supply be granted in this economic environment? The mix between flexible and non-flexible power generation is not solved yet. How will the peaks of alternative energy supply be balanced to grant for this basic supply?” Mai said.

Impact of increasing interconnectivity

And while there are technical, legal and financing challenges associated with energy transition moves across Europe, he also warned of the increasing risk cyber attacks could pose, “as the risk potential of the future takes on a new dimension in terms of scope and gravitas.”

The energy sector is already the fifth most frequent sector targeted by cyber hackers, Expert Days delegates heard and attacks will become more likely due to increasing connectivity.

The threat posed by power blackouts is also increasing. Outside of Europe, major power outages in the US caused by weather increased from five to 20 each year during the mid 1990s, to 50 to 135 each year during the past five years.

The impact of power quality and blackout issues in the US currently costs industrial and commercial companies between $132bn and $209bn.

Meanwhile, in Germany 77% of production plants are affected at least once a year by power outages, according to AGCS.

  1. Expert Commentary - Q&A Special

    Implementation of the Energiewende is not going to be easy

    High energy prices have dimmed the initial elation over the prospect of shifting the entire country over to renewable energy. But there is no alternative for Europe, argues Dr Miranda Schreurs, director of the Environmental Policy Research Center at the University of Berlin. In a special Global Risk Dialogue Q&A she explains why the Energiewende is the only way for Germany and Europe to stay competitive.

    What are the biggest challenges for the Energiewende right now?


    Dr Miranda Schreurs: There are a few different big issues. Development of the grid infrastructure is certainly one. Right now the pace of development of renewable capacity is enormously high, but if we can’t transport the energy to demand centers, it’s a problem.

    If we don’t have rapid enough development of the infrastructure then there could be regional problems with energy security. This is another big issue: how do we make sure that we have a smooth transition in all regions of Germany?

    At the AGCS Expert Days conference you said that Germany would be able to manage the Energiewende technically but not in terms of costs. What’s the solution?



    Schreurs: Germany technically has enough wind, sun and biomass potential to meet domestic demand. But the costs would be quite high if you were to try to meet this demand just domestically. It’s more efficient to cooperate with neighboring countries. Quite simply you might have better wind capacity or sun capacity somewhere else. When the wind isn’t blowing in Germany it might be blowing in some other area. So if you are interconnected then you can smooth out some of the fluctuating problems with renewables. It would also give you the opportunity to maybe, say, cooperate with Austria or with Scandinavia in terms of storage capacity so you can store some of the renewable energy for times when it’s in demand.

    Can Germany manage the energy transition and at the same maintain its competitiveness as an economy?


    Schreurs: Yes, it’s possible to have an Energiewende even if the cost of energy is more expensive in Europe. The reality is that energy prices have long been much higher in Europe and in Germany than in the US and yet Germany has remained one of the most competitive economies. Why? One answer is that because of these higher prices, Germany has had to become a leader in energy efficiency, in production processes, and in finding ways to reduce the resource inputs into manufacturing. I think the same argument applies to the future. If Germany chooses now to slow down on the Energiewende, the costs in the long term could be very high. The reality is that Germany and Europe as a whole do not have the fossil fuel resources that North America or Russia have. So the only way Europe is going to be able to compete in the long run is if it becomes the most efficient place in terms of energy and resource use. Higher prices are hard but they drive innovation and the search for more energy efficiency.

    France and the UK rely on nuclear power. Poland clings to coal. What has to be done to bring the Energiewende to a European level?

     

    Schreurs: I think discussion at the European level needs to continue in relationship to CO2emissions. We have targets for 2020: 20% efficiency improvement, 20% renewable energy target, 20% CO2 emission reduction target. We need to develop new targets for 2030 that will help to keep the price of coal higher, and fix the emissions trading system, so that the price of coal increases. Doing this would be one important step helping to shift the economy away from fossil fuel to more renewables. There are also changes in other European states. France is currently 78% dependent on electricity from nuclear power. However, there is little chance that France will be able to replace all of its old nuclear power plants with new nuclear capacity. It’s simply too expensive. So there is going to also be a push for more development of other energy sources.