In a bid to prevent potential power shortages, the French government has recently extended a plan allowing electricity producers to burn more coal this winter. This decision comes as the French power company faces lower nuclear output due to maintenance issues in some of its reactors, reducing France's historical average energy production.
France heavily relies on nuclear energy, which accounts for 60% to 75% of its electricity supply, with 56 nuclear reactors playing a crucial role in the country's energy provision. However, many of these reactors were built in the 1980s and are approaching retirement age. The extended operational periods and aging equipment have led to more frequent maintenance requirements. Unfortunately, a shortage of skilled professionals, retirements, and financial issues within the French power company have collectively contributed to the decline in nuclear energy production.
There are also concerns about potential disruptions in the supply of nuclear materials, possibly related to recent political changes in Niger, although this remains uncertain. The French Ministry of Energy Transition has stated that the current pressure on the electricity system is lower than the same period last year. They also express optimism about the prospects of nuclear and renewable energy production while noting a decrease in energy consumption. Nevertheless, they emphasize the need to take all necessary measures to ensure France's energy supply security.
Coal Resurgence Across Europe
Europe as a whole is grappling with the need to secure its energy supply. As part of sanctions against Russia, the European Union abandoned Russian energy supplies last year, resulting in an energy crisis and skyrocketing electricity prices. Consequently, many countries that had previously committed to phasing out coal as an energy source have reintroduced coal as a reliable source of heat and electricity.
For example, Germany restarted previously closed coal-fired power plants last year. In April of this year, Germany officially shut down its last three nuclear power stations, making the country's energy supply more fragile and leading to an increased reliance on coal-fired power plants.
Netherlands temporarily lifted restrictions on coal-fired electricity generation last year, amending existing legislation to allow full-load operation of coal-fired power plants until 2024. Austria also revived its coal-fired power plant in the southern city of Mellach.
While the UK initially pledged to close all coal plants by 2024, in recent years, it has requested energy companies to increase coal production, postponed the closure of coal-fired power stations, and approved the first new coal mine in 30 years, aimed at extracting coking coal for steel production.
In August 2023, Poland filed a lawsuit aiming to repeal three major climate change policies of the European Union, arguing that these policies exacerbate social inequality. Poland contends that the EU's 2035 ban on the sale of carbon-emitting new cars places a heavy burden on less affluent Europeans and the automotive sector. The EU's emission reduction targets threaten Poland's energy security, and reforms to the EU coal market laws restrict Poland's coal mining industry, harming the interests of 75,000 Polish coal workers. Currently, approximately 70% of Poland's electricity is derived from coal.
Global Energy Market Shifts
Europe's determination to sanction Russian energy, even at higher prices, has reshaped the global energy market. The mysterious destruction of the Nord Stream natural gas pipeline played a crucial role in this shift.
Coal Companies Reap Profits
According to IEA data, global coal demand increased by 1.2% in 2022, reaching a historic high. The benchmark price for high-quality thermal coal in Europe averaged $295 per ton in 2022, doubling from 2021 and nearly quadrupling the average price between 2010 and 2020.
European countries have entered the global coal market, purchasing coal at high prices, thereby improving the economic conditions of coal-exporting countries such as the United States, Indonesia, Australia, Kazakhstan, South Africa, and Colombia. According to research from the Financial Times and S&P Capital IQ, the profits of the world's top 20 coal companies reached $97.7 billion in 2022, compared to just $28.2 billion in 2021.
Embracing Wood as an Energy Source
In addition to coal, the European Union continues to subsidize the use of wood as a source of energy, marking a return to the energy stage for wood after the industrial revolution.
In recent years, the EU has recognized wood as a "carbon-neutral fuel," promoting its use for electricity generation to effectively mitigate carbon dioxide emissions. According to their perspective, wood is considered a low-carbon fuel compared to coal or natural gas since new trees can grow after old ones are harvested, minimizing the climate impact.
However, environmentalists express concerns about deforestation as European countries look beyond their borders for sources of wood fuel. For example, the Southeastern United States has rapidly developed a wood pellet industry in less than a decade, with 23 factories producing over 100,000 tons of wood pellets annually, most of which are exported to Europe.
Last July, Hungary banned wood pellet exports, and Bulgaria ceased exporting timber to non-EU countries in mid-August. Environmentalists worry about the depletion of Europe's remaining forests.
While the EU sees wood as a low-carbon solution, some argue that burning trees and firewood may not be the best way to transition away from fossil fuels and combat climate change.
Europe's Decarbonization Relies on Deindustrialization
According to IEA data, Europe's electricity industry increased its carbon dioxide emissions by 28 million tons when accounting for the non-inclusion of carbon emissions from burning wood. This was due to a temporary reliance on coal, which raised carbon intensity.
Nonetheless, the EU managed to reduce its overall carbon emissions. In 2022, EU carbon dioxide emissions decreased by 2.5%, amounting to a reduction of 70 million tons. This reduction was primarily driven by decreases in industrial carbon emissions, with the construction industry showing the most significant decrease of 60 million tons.
Soaring electricity prices, energy crises, and large-scale industrial shutdowns, often resulting in relocation, have played a role in this reduction. For instance, in the aluminum industry, Europe saw cumulative production capacity closures and reductions totaling 1.66 million tons in 2022.
In November 2022, Paul Wos, the Secretary-General of European Aluminium, expressed concern over the catastrophic situation, stating that natural gas and electricity prices had increased tenfold, rendering production unsustainable. Europe's aluminum production decreased by 50%, impacting various industries and daily life, as aluminum is essential for automobile manufacturing, agriculture, and food packaging.
The European Roundtable of Industrialists wrote to the European Commission, highlighting the dramatic decline in the competitiveness of European industry due to surging energy prices. Without intervention, Europe's competitiveness may become difficult to restore.
The Wall Street Journal reported that high natural gas prices are driving European manufacturing to the United States. The extreme fluctuations in energy prices and challenging supply chain issues are posing threats to European businesses, while subsidies in the United States are compelling European companies to relocate."
OWELL is a leading player in the energy industry, specializing in ensuring reliable power supply and facilitating the transition to sustainable energy sources. We offer a diverse portfolio of energy solutions, including diesel and gas generators, as well as cutting-edge wind and solar power systems.
We envision a future where reliable energy supply coexists harmoniously with a cleaner planet. OWELL is committed to driving this transition.
"Powering Progress, Preserving the Planet"