The rise in energy prices caused by the Russian Ukrainian crisis has intensified the inherent vulnerability of the European energy system. Can Europe's expedient measures work in order to accelerate the escape from energy dependence on Russia? The latest comb for reference.
European energy is highly dependent on imports, and green transformation is the general trend
The European energy system has a very low self-sufficiency rate and is highly dependent on imports. In recent years, it has transformed to green energy. The consumption of primary energy in Europe is huge, but the output of traditional energy such as natural gas, oil and coal is low and the dependence on foreign countries is very high. Among European energy imports, about 40% of natural gas, 30% of crude oil and 50% of coal are supplied by Russia. In order to reduce external dependence on energy and promote carbon emission reduction, Europe has accelerated its energy transformation, and the proportion of renewable energy power supply has rapidly increased to 40%. As a transitional energy under the carbon neutralization path, the proportion of natural gas power generation has also increased.
The rise in energy prices caused by the intensification of geographical conflicts has intensified the inherent vulnerability of the European energy system. Due to the "radical" energy transformation and large fluctuations in green energy, the European energy system has become more fragile, and the dependence on traditional energy such as Russian natural gas continues to rise. Since the outbreak of the Russian Ukrainian war, the United States, Europe and other economies have successively increased sanctions against Russia, aggravating the situation in Russia and Ukraine. Under the aggravation of geographical conflict, the energy supply is limited, which intensifies the pressure of energy price rise in Europe, and further intensifies the inherent vulnerability of the European energy system.
The fragile energy system is increasing the constraints on the European economy
The recent surge in energy prices has led to a sharp rise in the production costs of some upstream enterprises in Europe, seriously eroding profits and depressing the production boom. In some upstream industries, including electrolytic aluminum, refined zinc and chemical fertilizer, the energy cost accounts for a high proportion of the total production cost. For these industries, under the background of soaring energy prices, relevant enterprises can only be forced to reduce production or even stop production. For example, Alcoa's company in Spain directly stopped production and closed down 228000 tons of production capacity; German aluminum giant trimet also announced that it plans to reduce production by 30% due to the rapid rise of electricity prices.
Rising energy prices have a greater impact on the European residential sector, especially low-income residents. Compared with the enterprise sector, the European residential sector has been significantly more impacted by the rise in energy prices. In Germany, for example, the price of domestic natural gas is about three times that of industrial natural gas. At the same time, European residential electricity prices are also significantly higher than industrial electricity prices. Moreover, compared with the United States and other countries, the proportion of energy consumption of European residents in personal consumption expenditure has risen above 10%, which is significantly higher. Especially for some low-income residents, they are suffering from the rise of energy prices.
In the context of European energy transformation, it is necessary to be vigilant against the evolution of inflation into a long-term risk
In order to speed up getting rid of dependence on Russian energy, Europe has launched short-term and medium-term expedients, but it is difficult to solve the energy war within the year. The EU announced that it would reduce its natural gas imports from Russia by 2 / 3 in 2022 and completely end its dependence on Russian natural gas by 2030. As an expedient measure, Europe will increase gas storage construction in the short term and restart nuclear power construction in the medium term. However, during the year, the legislative prospect of restarting nuclear power is not clear. The construction of gas storage requires a lot of investment and landing resistance. LNG import faces strong competition, and the war of energy may continue.
For policy authorities, the inflation risk under the European energy transformation is likely to evolve into a long-term problem. Under the intertwined influence of shrinking capacity of traditional energy and high volatility of green energy, high energy prices may evolve into a new normal in the transition period of energy transformation. For policy authorities such as the European Central Bank, the prediction of long-term inflation caused by energy transformation has brought significant upward risks. Just "seeing through" is not enough, and we must act actively. For this reason, the European Central Bank significantly raised its inflation forecast in March and announced that it would end its asset purchase plan ahead of schedule, with an obvious turn to "Eagle".
Risk warning: the impact and duration of the Russian Ukrainian war exceeded expectations; Global covid-19 virus mutation exceeded expectations; Major oil producing countries once again launched a price war.
