As the Western defence alliance has all but died under the new US administration, Europe must deal with an increasing likelihood of having to face Russia in the battlefield.
Another nice thing about Nuclear is that there are several useful suppliers of Uranium that are not iffy, such as Canada.
During a span of the 1970s, France decarbonized 10% of its electricity production every year. And now, they're adding loads of solar and wind, with sensible regulations e.g. that stipulate that parking lots be overbuilt with solar roofs. Electrification is the key to both energy independence and decarbonization; France shows us how it can be done.
Because Germany together with the UK has the world's stupidest power pricing system. Essentially, in Germany, consumers pay the marginal cost of production for the last MW of electricity on ALL the electricity they use. This marginal production cost is typically given by gas power, so Germans and Brits alike tend to pay the price of power generated by natural gas for all the power they use even though most of the power comes from much cheaper renewables.
My solution would be the way we regulate water prices in the UK. Set prices based on the average price of the production mix (e.g. Last year it last three years). Then add a premium for maintenance and investment caoex and a profit margin for the companies running the power plants and that’s it.
Thanks for sharing! Would you use the average production cost of all sources of energy, including the most expensive? If so, where's the incentive to switch to low-cost production? And is each source weighted the same independent of its CO2 footprint?
Good questions that I haven't thought about. I would use all sources of energy, and I wouldn't overcomplicate things by weighing them differently based on CO2 emissions. The fun thing is that wind and solar are already the cheapest sources of energy to build, and if you use a one year or three year lookback period, then a utility company that builds new wind farms or solar farms can reap excess profits for the first one to three years until the lower price for the energy mix kicks in.
Another way to incentivise the energy transition would be to say that companies can only get a surcharge for capex if it is invested in renewables or gas with CCS.
Joachim's excellent piece about the "convenience yield" of renewables when your hydrocarbons come from sources that are geopolitically unreliable is well worth reading.
I'd add a couple of comments.
- The (unfortunately popular) proposition that gas is more competitive than renewables if you subtract the subsidies on the latter conveniently forgets about the (implicit) subsidy to gas that results from CO2 - or more broadly damages to the environment and human health - not being sufficiently priced (= taxed).
- the base load discussion is a complicated one. In a system dominated by intermittent renewables (which European energy systems are on the way to becoming), the non-renewable part of the electricity supply will need to be sufficiently flexible to respond to the ramping up and down of renewable sources. This makes base load plants like nuclear uneconomical as they need to run on more than 80% full load hours) and/or the electricity generated from them very expensive (unless itself massively subsidised). The only place I can convincingly see for nuclear in the energy mix is to power data centres and suchlike, which need reliable power 24/7. But there the problem is long build times (unless you want to have the Chinese build them for you). And the jury on SMRs is still out.
I get your point on the lack of flexibility of nuclear, but I think the consensus is moving towards the direction of using nuclear for baseload and SMR for specific applications, like data centres, but more importantly, energy-intensive industry like steel, cement, etc.
Then you add renewables to the mix and peaker gas and hydropower (where available) to ensure enough supply during peak demand.
Plus, I am hopeful that one day in the distant future (2040 and beyond), we will have large scale long-term energy storage solutions, so we don't need peaker gas anymore.,
Personally, I am not so concerned if low-CO2 energy like nuclear is expensive. What matters to me is that it works.
Looking at the Electricity Maps app, I see zero countries that have been able to decarbonize with renewables. Germany for example, after the hundreds of billions spent, still has the third most dirty electricity (at the third highest prices, to boot).
(No, countries that are not highly industrial (like Albania) or are mountainous (like Norway, Switzerland or other dammed places don't count.)
But I do see countries like France that have very low CO2 with nuclear.
Base load is complicated, but the results seem to be rather clear. Being German, I hear it every day that nuclear is bad and that in principle renewables are better. However, they never make it from the "principle" level to the effective one.
I personally don’t have a problem with nuclear energy, it’s as safe as renewables statistically. What’s “bad” about it is that its lack of flexibility makes it very expensive (certainly compared to renewables) even when you consider the intermittency problem - and before you consider huge cost overruns due in part to lengthy construction periods. (I had a piece out in September showing the cost comparison on the basis of IEA numbers.) Cost matters a great deal if we want to achieve decarbonisation. The cost aspect due to (lack of) flexibility makes the discussion on base load secondary at most - only useful for certain politicians who need something simple to tell their voters. When you have a renewables-dominant system, there’s not a lot of scope for base load to operate economically. But overall it’s probably true that some nuclear will be needed.
Preferably fought via energy independence instead of putting on fatigues (that’s the one ‘privileged’ job Europe’s neat middle classes gladly hand to white populist voters. Just like Kiev’s middle- and upper classes btw, as they put in place a system where conscription can be avoided by being in ‘a high(er) tax bracket. Because our country needs our financial contributions’...
BS of course as UA is fully dependent on foreign funding. But some things never change i guess.
I understand how unreliable vulgarians like Trump put an unsavory taste in the mouths of the decent peoples of the western world but i just have to point at the two times Biden wanted to halt oil and lng exports to Europe around the 22’ US midterms. (Nothing, absolutely nothing, is more important in US politics than prices at the pump at election time).
Despite having a full blown energy department no one in his admin apparently knew that the US relies on foreign refineries to process the shale oil which dominates US production. So it took a WSJ piece by Chevron boss Wirth explaining this to have the proposed bans halted. (Btw; the UK is looking at closing its last refinery).
An energy ‘system’ which needs 3 x the production capacity of the current, that has no storage capacity, and needs a complete fossil back up system derived from a significant share of profit making moments (meaning maintenance and replacements will - also - have to be subsidized), sure sounds expensive to me. And now even to EY:
Britain gripped by industrial decline as net zero drives up energy costs https://tinyurl.com/55wzjvka (German unemployment is at covid levels).
And that’s a ‘system’ still without the necessary massive grid build out - which hasn’t commenced in any western nation. The NL plans (for now) to spend 200 B the next 15 years just to lay 100.000 km of cables and build 50.000 transformer sheds (They’re as popular in neat middle class neighborhoods as wind mills….).
The fanatics who pushed for this are now out of the NL gov so they can conveniently remain In Theory. In 2021 while still in power, energy & climate minister Rob Jetten (Dutch LibDems) smugly asked a conservative proponent of energy realism and thus of gas and nuclear energy ‘so, tell me how you heat a house with nuclear energy’.
Sic sic sic.
As if his stupidity wasn’t enough, the leader of the Greens, Jesse Klaver - like Jetten a boy-man - warmly supported Jetten’s demonstration of professional ignorance. Boy-man Jetten studied public admin and became a consultant, boy-man Klaver studied social work and became a politician/post Christian CO2 theologist.
'No, in the next few years, the goal for Europe must be to reduce its dependency on fossil fuel imports as much as possible for political reasons, even if it costs more to run renewable energy than gas (which it doesn’t but some people still seem to think so). Consider it part of our defence spending if you must'.
You've put yourself in an impossible position. (But at least you're not lonely there). Now renewables serve a political and strategic purpose, if not A New Cause. After having been a juicy middle class totem for decades - subsidized EVs, solar panels and guaranteed high sell-back prices for your electricity AND being a Good Person. Gov subsidized virtue signalling, what’s not to like? Of course the recipient signallers prefer to call it gov nudging - as supposedly sound economic theories often serve to back up the religious- and psychological needs of academic post Christians).
And despite no one really believing Russia is a threat (where’s the emergency conscription? It takes at least ten years to build out a European nation’s armed forces) it's understandable how you ended up in your renewables justification-predicament: European electricity prices are so high now (though some people still seem to think they're not) that business is voting with its feet. While German unemployment is now back at covid level.
So bring in the foreign threats to justify policy. The UK gov does the same ánd at the same time blames past admins ánd lies about renewables’ costs to citizens:
But here’s some data from the real world (which doesn’t look like collapsing any time soon. The UK economy however…):
The Spectator data tracker. Updated daily - all things UK (and EU) energy, costs, emissions etc https://tinyurl.com/3d4cjuds
For those planning a hot virtue signalling holiday: the BR gov is clearing tens of thousands of acres of Amazonian forest to build an eight lane highway so that the drive from Belem airport to COP 30 is a more comfortable one. The visiting 100.000 or so popstars, gov talking heads and NGO networkers, pardon, climate worriers, will be grateful, especially i guess the ones that come by private jet. (For a satirical review of COP 28 - by a climate scientist no less: ‘COP-Out in Dubai’ ‘https://tinyurl.com/3px5v3ee)
And look at that: after being threatened with a cut off of federal funds California’s Newsom admits his state did not do enough to prevent forest fires…https://tinyurl.com/4ctuxnnn
Is it getting cold in Hell already?
As for the position that the ‘damage’ from CO2 is not accounted for (shall we then also account for agri production, desert greening, high life expectancy etc?) and the 2007 US court ruling in favor of it:
A Bedrock Document of Climate Alarmism May Soon Be Cracked, And It’s About Time
A memorable line back then by dissenting judge Scalia: ‘[E]verything airborne, from Frisbees to flatulence, qualifies as an “air pollutant.”
And indeed, today some fight cowfarts. As long as the fight is subsidized of course.
There’s more good news: a few weeks ago climate science popstar (the hockeystick) Michael Mann and his lawyers got thrashed in a DC court:
‘In today’s ruling the judge pulled no punches, writing of Mann and his two lead lawyers:
They each knowingly made a false statement of fact to the Court and Dr. Mann knowingly participated in the falsehood, endeavoring to make the strongest case possible even if it required using erroneous and misleading information.
That sentence has me thinking of RCP8.5, Billion Dollar Disasters, and the fake ICAT dataset, but I digress’. https://tinyurl.com/3a62jmzc
I guess the Ruski ‘danger’ soon will not be enough to serve as a justification for those living in theory...
Btw: relying on EMBER is like having the Guardian as your political compass.
there is a practical approach for speed (vs haste) , but it involves some favoritism that the EU will find distasteful.
it would involve better terms for EU energy majors that have shown competence on both the fossil and renewable side, such as equinor and shell. they can provide NG at the lowest cost via pipelines, not needing LNG and transport costs. unfortunately, someone will have to :
- eat the cost of some hastily built LNG import infrastructure
- help these majors make IRRs in renewables much closer than new fossil expansion
a secondary effect is that keeping the money within the EU can help with other defense initiatives. for example, the EU spend on military seems very difficult to redirect away from american firms.
any article that touches on multiple topics here has :
- MSCI chart showing energy, utils are in the dumpster along w/auto
- US share of arms per EU country (i wonder where turkey would be)
Another nice thing about Nuclear is that there are several useful suppliers of Uranium that are not iffy, such as Canada.
During a span of the 1970s, France decarbonized 10% of its electricity production every year. And now, they're adding loads of solar and wind, with sensible regulations e.g. that stipulate that parking lots be overbuilt with solar roofs. Electrification is the key to both energy independence and decarbonization; France shows us how it can be done.
See my comment above on why I'm not entirely convinced about nuclear being a solution.
Why are the all-in power costs the highest in Germany (versus other E.U. countries)? R these high costs helpful ?
Because Germany together with the UK has the world's stupidest power pricing system. Essentially, in Germany, consumers pay the marginal cost of production for the last MW of electricity on ALL the electricity they use. This marginal production cost is typically given by gas power, so Germans and Brits alike tend to pay the price of power generated by natural gas for all the power they use even though most of the power comes from much cheaper renewables.
interesting viewpoint! Which alternative to the Merit-Order system currently in place would you prefer / recommend?
My solution would be the way we regulate water prices in the UK. Set prices based on the average price of the production mix (e.g. Last year it last three years). Then add a premium for maintenance and investment caoex and a profit margin for the companies running the power plants and that’s it.
Thanks for sharing! Would you use the average production cost of all sources of energy, including the most expensive? If so, where's the incentive to switch to low-cost production? And is each source weighted the same independent of its CO2 footprint?
Good questions that I haven't thought about. I would use all sources of energy, and I wouldn't overcomplicate things by weighing them differently based on CO2 emissions. The fun thing is that wind and solar are already the cheapest sources of energy to build, and if you use a one year or three year lookback period, then a utility company that builds new wind farms or solar farms can reap excess profits for the first one to three years until the lower price for the energy mix kicks in.
Another way to incentivise the energy transition would be to say that companies can only get a surcharge for capex if it is invested in renewables or gas with CCS.
Joachim's excellent piece about the "convenience yield" of renewables when your hydrocarbons come from sources that are geopolitically unreliable is well worth reading.
I'd add a couple of comments.
- The (unfortunately popular) proposition that gas is more competitive than renewables if you subtract the subsidies on the latter conveniently forgets about the (implicit) subsidy to gas that results from CO2 - or more broadly damages to the environment and human health - not being sufficiently priced (= taxed).
- the base load discussion is a complicated one. In a system dominated by intermittent renewables (which European energy systems are on the way to becoming), the non-renewable part of the electricity supply will need to be sufficiently flexible to respond to the ramping up and down of renewable sources. This makes base load plants like nuclear uneconomical as they need to run on more than 80% full load hours) and/or the electricity generated from them very expensive (unless itself massively subsidised). The only place I can convincingly see for nuclear in the energy mix is to power data centres and suchlike, which need reliable power 24/7. But there the problem is long build times (unless you want to have the Chinese build them for you). And the jury on SMRs is still out.
I get your point on the lack of flexibility of nuclear, but I think the consensus is moving towards the direction of using nuclear for baseload and SMR for specific applications, like data centres, but more importantly, energy-intensive industry like steel, cement, etc.
Then you add renewables to the mix and peaker gas and hydropower (where available) to ensure enough supply during peak demand.
Plus, I am hopeful that one day in the distant future (2040 and beyond), we will have large scale long-term energy storage solutions, so we don't need peaker gas anymore.,
Personally, I am not so concerned if low-CO2 energy like nuclear is expensive. What matters to me is that it works.
Looking at the Electricity Maps app, I see zero countries that have been able to decarbonize with renewables. Germany for example, after the hundreds of billions spent, still has the third most dirty electricity (at the third highest prices, to boot).
(No, countries that are not highly industrial (like Albania) or are mountainous (like Norway, Switzerland or other dammed places don't count.)
But I do see countries like France that have very low CO2 with nuclear.
Base load is complicated, but the results seem to be rather clear. Being German, I hear it every day that nuclear is bad and that in principle renewables are better. However, they never make it from the "principle" level to the effective one.
I personally don’t have a problem with nuclear energy, it’s as safe as renewables statistically. What’s “bad” about it is that its lack of flexibility makes it very expensive (certainly compared to renewables) even when you consider the intermittency problem - and before you consider huge cost overruns due in part to lengthy construction periods. (I had a piece out in September showing the cost comparison on the basis of IEA numbers.) Cost matters a great deal if we want to achieve decarbonisation. The cost aspect due to (lack of) flexibility makes the discussion on base load secondary at most - only useful for certain politicians who need something simple to tell their voters. When you have a renewables-dominant system, there’s not a lot of scope for base load to operate economically. But overall it’s probably true that some nuclear will be needed.
See solar PV and onshore wind in the penultimate chart here: https://open.substack.com/pub/thinicemacroeconomics/p/cost-and-value-of-renewables-mixing?r=1oa8fn&utm_medium=ios
Ah, now it’s the Ruskies.
Preferably fought via energy independence instead of putting on fatigues (that’s the one ‘privileged’ job Europe’s neat middle classes gladly hand to white populist voters. Just like Kiev’s middle- and upper classes btw, as they put in place a system where conscription can be avoided by being in ‘a high(er) tax bracket. Because our country needs our financial contributions’...
BS of course as UA is fully dependent on foreign funding. But some things never change i guess.
I understand how unreliable vulgarians like Trump put an unsavory taste in the mouths of the decent peoples of the western world but i just have to point at the two times Biden wanted to halt oil and lng exports to Europe around the 22’ US midterms. (Nothing, absolutely nothing, is more important in US politics than prices at the pump at election time).
Despite having a full blown energy department no one in his admin apparently knew that the US relies on foreign refineries to process the shale oil which dominates US production. So it took a WSJ piece by Chevron boss Wirth explaining this to have the proposed bans halted. (Btw; the UK is looking at closing its last refinery).
An energy ‘system’ which needs 3 x the production capacity of the current, that has no storage capacity, and needs a complete fossil back up system derived from a significant share of profit making moments (meaning maintenance and replacements will - also - have to be subsidized), sure sounds expensive to me. And now even to EY:
Britain gripped by industrial decline as net zero drives up energy costs https://tinyurl.com/55wzjvka (German unemployment is at covid levels).
And that’s a ‘system’ still without the necessary massive grid build out - which hasn’t commenced in any western nation. The NL plans (for now) to spend 200 B the next 15 years just to lay 100.000 km of cables and build 50.000 transformer sheds (They’re as popular in neat middle class neighborhoods as wind mills….).
The fanatics who pushed for this are now out of the NL gov so they can conveniently remain In Theory. In 2021 while still in power, energy & climate minister Rob Jetten (Dutch LibDems) smugly asked a conservative proponent of energy realism and thus of gas and nuclear energy ‘so, tell me how you heat a house with nuclear energy’.
Sic sic sic.
As if his stupidity wasn’t enough, the leader of the Greens, Jesse Klaver - like Jetten a boy-man - warmly supported Jetten’s demonstration of professional ignorance. Boy-man Jetten studied public admin and became a consultant, boy-man Klaver studied social work and became a politician/post Christian CO2 theologist.
'No, in the next few years, the goal for Europe must be to reduce its dependency on fossil fuel imports as much as possible for political reasons, even if it costs more to run renewable energy than gas (which it doesn’t but some people still seem to think so). Consider it part of our defence spending if you must'.
You've put yourself in an impossible position. (But at least you're not lonely there). Now renewables serve a political and strategic purpose, if not A New Cause. After having been a juicy middle class totem for decades - subsidized EVs, solar panels and guaranteed high sell-back prices for your electricity AND being a Good Person. Gov subsidized virtue signalling, what’s not to like? Of course the recipient signallers prefer to call it gov nudging - as supposedly sound economic theories often serve to back up the religious- and psychological needs of academic post Christians).
And despite no one really believing Russia is a threat (where’s the emergency conscription? It takes at least ten years to build out a European nation’s armed forces) it's understandable how you ended up in your renewables justification-predicament: European electricity prices are so high now (though some people still seem to think they're not) that business is voting with its feet. While German unemployment is now back at covid level.
So bring in the foreign threats to justify policy. The UK gov does the same ánd at the same time blames past admins ánd lies about renewables’ costs to citizens:
DESNZ Caught Lying About Renewable Costs
https://tinyurl.com/ykmwcb27
But here’s some data from the real world (which doesn’t look like collapsing any time soon. The UK economy however…):
The Spectator data tracker. Updated daily - all things UK (and EU) energy, costs, emissions etc https://tinyurl.com/3d4cjuds
For those planning a hot virtue signalling holiday: the BR gov is clearing tens of thousands of acres of Amazonian forest to build an eight lane highway so that the drive from Belem airport to COP 30 is a more comfortable one. The visiting 100.000 or so popstars, gov talking heads and NGO networkers, pardon, climate worriers, will be grateful, especially i guess the ones that come by private jet. (For a satirical review of COP 28 - by a climate scientist no less: ‘COP-Out in Dubai’ ‘https://tinyurl.com/3px5v3ee)
And look at that: after being threatened with a cut off of federal funds California’s Newsom admits his state did not do enough to prevent forest fires…https://tinyurl.com/4ctuxnnn
Is it getting cold in Hell already?
As for the position that the ‘damage’ from CO2 is not accounted for (shall we then also account for agri production, desert greening, high life expectancy etc?) and the 2007 US court ruling in favor of it:
A Bedrock Document of Climate Alarmism May Soon Be Cracked, And It’s About Time
https://tinyurl.com/4u8469ey
A memorable line back then by dissenting judge Scalia: ‘[E]verything airborne, from Frisbees to flatulence, qualifies as an “air pollutant.”
And indeed, today some fight cowfarts. As long as the fight is subsidized of course.
There’s more good news: a few weeks ago climate science popstar (the hockeystick) Michael Mann and his lawyers got thrashed in a DC court:
‘In today’s ruling the judge pulled no punches, writing of Mann and his two lead lawyers:
They each knowingly made a false statement of fact to the Court and Dr. Mann knowingly participated in the falsehood, endeavoring to make the strongest case possible even if it required using erroneous and misleading information.
That sentence has me thinking of RCP8.5, Billion Dollar Disasters, and the fake ICAT dataset, but I digress’. https://tinyurl.com/3a62jmzc
I guess the Ruski ‘danger’ soon will not be enough to serve as a justification for those living in theory...
Btw: relying on EMBER is like having the Guardian as your political compass.
I wouldn’t bet on it.
there is a practical approach for speed (vs haste) , but it involves some favoritism that the EU will find distasteful.
it would involve better terms for EU energy majors that have shown competence on both the fossil and renewable side, such as equinor and shell. they can provide NG at the lowest cost via pipelines, not needing LNG and transport costs. unfortunately, someone will have to :
- eat the cost of some hastily built LNG import infrastructure
- help these majors make IRRs in renewables much closer than new fossil expansion
a secondary effect is that keeping the money within the EU can help with other defense initiatives. for example, the EU spend on military seems very difficult to redirect away from american firms.
any article that touches on multiple topics here has :
- MSCI chart showing energy, utils are in the dumpster along w/auto
- US share of arms per EU country (i wonder where turkey would be)
https://www.bloomberg.com/opinion/articles/2025-03-18/everyone-loves-german-rearmament
I agree entirely with this, which chimes a little with some thoughts of mine on the current conservative narrative about the UK. https://open.substack.com/pub/christianvalueinvestor/p/on-pessimism-and-straw-men-in-uk?utm_source=share&utm_medium=android&r=llcg5