Europe Trapped

“We will drill, baby, drill and by doing that we will lead a large-scale decline in prices”. This is how Donald Trump began his speech on 19 July 2024, accepting the nomination for the presidential race at the Republican National Convention. Trump went on to make other promises after invoking the somewhat forgotten slogan “Drill, baby, drill”, which was promoted in 2008 by the then governor of Maryland, Michael Steele. “By slashing energy costs, we will in turn reduce the cost of transportation, manufacturing and all household goods. We have more liquid gold under our feet than any other country by far. We are a nation that has the opportunity to make an absolute fortune with its energy”, he claimed. He also told us what his plans were for the money: “And all of the trillions of dollars that are sitting there not yet spent, we will redirect that money for important projects like roads, bridges, dams and we will not allow it to be spent on the meaningless Green New scam ideas”.

But if someone wants to sell something, there has to be a willing buyer. There is no need to guess who the new US administration sees as the consumer. Just listen to the conversation popular US podcast author and investor Anthony Pompliano posted on YouTube on 28 October 2024. His guest was Howard Lutnick, CEO of Cantor Fitzgerald and BGC Group, whom Trump intends to appoint as Secretary of Commerce. Lutnick started outlining his plans with a series of rhetorical questions. “Do you know how much oil Korea has? Zero. And they are our ally. Do you know how much oil Germany has? They also need it. They are our ally... if we sell them oil. How much oil does Japan have? Zero”, said Lutnick, who has spent his entire adult life dealing in money and securities. “We will sell it to them. We will have better trade deals. Thank God for America”, he announced, smiling like the cat who caught the canary. That said, the Trump administration’s plans for a return to fossil fuels may turn out to be the only viable option for the “canary” to survive the next few years, though at the expense of contributing to the construction or refurbishment of infrastructure such as highways, bridges and dams in the US.

The President of the European Commission, Ursula von der Leyen, has already acknowledged this. “We continue to receive a significant volume of LNG from Russia. Why not replace it with LNG from the US, which is cheaper for us and lowers our energy prices?” she announced on 8 November 2024 after the EU summit in Budapest. After Europe fell into the energy trap and voluntarily slammed the doors behind itself, an alternative to a more effective strategy for buying time in order to identify a way out of this predicament remains elusive.

Precious energy

When Trump made his well-known promise to “drill, baby, drill”, according to statistical compilations by the analyst firm Statista, as well as GlobalPetrolPrices, the average US family paid an average of USD 0.18 per kilowatt-hour of electricity in the first half of 2024. And the statistical US company paid USD 0.14. According to Trump, these costs are exorbitant. In China, the United States’ major economic competitor, the cost of 1 kWh for households was USD 0.08, and for industry, it was even lower, at USD 0.075. In the current era, the entire modern world is dependent on electricity for its functioning. This demand is set to increase, driven by growth in electromobility and rapid advancements in artificial intelligence, a field that requires significant energy resources. According to a Goldman Sachs report, the artificial intelligence models being developed in the US will already require by 2030 approximately 8 percent of the electricity produced there. It is therefore logical for major corporations to invest in advance in securing access to electricity from nuclear power plants, as this is a key consideration in the planning of data processing centres. Microsoft has invested in restarting the Three Mile Island nuclear power plant for its own use. In October 2024, Google and Amazon signed contracts to supply them with modular reactors.

The fact that China’s economy runs on electricity at half that cost has become a point of concern for both major corporate leaders and Trump in the US. But they would have real reason to panic if they lived in Europe. According to the same sources, in the first half of 2024, a household in Germany could purchase a kilowatt-hour of electricity for USD 0.34. Meanwhile, households in France paid less, at USD 0.29, and those in Poland paid the cheapest rate, at USD 0.22. An analysis of energy prices for industry pro-vides more interesting insights. The cost in Germany is USD 0.23, in France USD 0.17 and in Poland as much as USD 0.42. This is because the governments of the two largest EU countries are attempting to safeguard their most valuable economic assets. To this end, they are reducing energy prices for industry in a variety of ways.

In Poland, the current government, like its predecessor, is taking every measure at its disposal to shield itself from the ire of voters. Following the termination of the energy price freeze, their electricity bills would be comparable to those of their neighbours on the other side of the Oder. Meanwhile, should Trump and Lutnick’s plan be successful, electricity in both China and the US will be 3–5 times cheaper than in Europe. This will result in a significant loss of competitiveness for EU economies.

One potential consequence of this situation will be deterioration in Europe, affecting industry and the arguments that underpin collective self-indulgence. Over the past two decades, the observation that the United States and, above all, China are developing much faster than the EU has been met with statistics showing that the inhabitants of the EU are happier. This is because they have been provided with superior healthcare and pensions, numerous social security benefits, and free education. Their governments are committed to ensuring the well-being of Europeans. But this process requires a reliable income stream. Unfortunately, when the economies of EU countries become less competitive compared to China and the United States, which are competing with each other, there will be no money to continue funding collective self-indulgence.

However, this is not the only area in which funding will be an issue.

An unfinished love affair with the atom

To understand why the European Community was so quick to fall into the energy trap, it is important to recognise how inconsistent and sensitive to foreign influence and collective hysteria it has proved to be. The primary concern for the Old Continent is the limited size of its oil reserves. The gas fields are either running out, as in the case of the Dutch, or expensive to exploit, located as they are under the seabed off the coast of Norway and in the North Sea. Coal is another energy source to consider, but Western Eu-rope began to transition away from its use in power plants as early as the 1960s. Gas and oil were much more energy efficient, less disruptive to the environment and, above all, much cheaper. The global energy crisis was triggered in 1973 by the imposition of an oil embargo on Israel’s allies by Arab countries in the wake of the Yom Kippur War. The biggest panic was in Western Europe. In response, France took decisive action. Implementing Prime Minister Messmer’s strategic plan, the country successfully constructed 19 nuclear power plants with 58 reactors over a 10-year period. This is how it guaranteed to meet around 80 percent of the nation’s electricity needs.

West Germany commissioned 37 nuclear reactors (including those later inherited from East Germany), which provided the country with around 30 percent of its electricity in the 1990s. However, this initiative provoked enormous public opposition. From the mid-1970s onwards, protests escalated into street fighting. As described by Michał Kędzierski in an analysis for the Centre for Eastern Studies entitled Dokonało się: koniec atomu w Niemczech (It’s Done: The End of the Atom in Germany), the anti-nuclear movement began to unite representatives of a wide range of social groups, from students to farmers. This movement finally transformed into a political party – the Greens – in 1980, which quickly achieved its first successes in regional elections and entered the Bundestag in 1983.

Research in the Kremlin archives, to which the Russian writer and political prisoner Vladimir Bukovsky was granted access after the collapse of the Soviet Union, has revealed the extent to which Soviet intelligence had infiltrated peace and anti-atomic organisations in West Germany. It is noteworthy that a young KGB officer, Vladimir Putin, posted in 1985 to an outpost in the East Germany, participated in this process. However, the Chernobyl disaster was the key factor in freezing the development of nuclear pow-er, both in West Germany and on a global scale. The incident at a nuclear power plant, in which the staff carelessly failed to follow safety procedures, provided opponents of this technology with further arguments. In Poland, the government of Tadeusz Mazowiecki made the decision to halt construction of the power plant in Żarnowiec, which was nearing completion, due to a wave of hysteria.

A decade later, nuclear power has been replaced in Europe by the new Holy Grail, namely renewable energy sources.

However, there is no miracle cure.

Into the trap

The reason why electricity in China is available at a price 3–4 times lower than in Europe is clear, though it may appear counterintuitive at first. After all, approx. 24 percent of the energy consumed in the EU currently comes from RES, and sunshine and wind are free. In China, this rate fluctuates at around 17 percent. The substantial cost variation arises from what, for convenience, can be referred to as “downtime” and “fillers”.

RES downtime is influenced by a variety of factors, including time of day, year and weather conditions. However, when considering long-term averages, the data indicates that RES downtime in Europe is approximately

60–70 percent of the time (for solar and wind power). Despite the addition of photovoltaic panels and wind farms, as prescribed by the European Green Deal, the issue of “downtime” remains unresolved. Only the construction of substantial energy storage facilities will provide a viable solution. In their absence, this process relies on “fillers” such as electricity from nuclear reactors or fossil fuels. The addition of biomass or hydropower on a European scale is negligible. The cost of energy is determined by the price of these “fillers”.

For this reason, China has been pursuing the construction of coal-fired power plants for a decade. The current number of operational turbines is 1,118, with a total capacity of 243 GW. They chose this option because they have huge coal deposits. This is their short-term programme. The long-term plan sets out measures for the expansion of RES and the commissioning of nuclear reactors with an installed capacity of at least 400 GW by 2050, plus investment in energy storage facilities. According to the Global Energy Monitor, 66 of these are currently under construction in China with a total capacity of 40 MW. This approach enables Beijing to maintain a consistently affordable electricity supply.

A similar effect is to be expected from Trump’s “drill, baby, drill” policy, only the “filler” role is to be played by gas instead of coal. In the longer term, the US Department of Energy envisages the commissioning of more nuclear reactors by 2050, so that total capacity from the atom will reach 200 GW. However, given Beijing’s more ambitious intentions, it is likely that the White House will respond promptly and adjust these plans.

In the case of the European Union, gas was also to become a cheap “filler”. This was due to a combination of factors. Chancellor Gerhard Schröder cultivated a strong relationship with the young Russian President Vladimir Putin, who pledged to ensure reliable blue fuel supplies for the German economy. Anti-nuclear sentiment in Europe persisted, and was further exacerbated by the Fukushima power plant’s failure due to tsunami damage. So the programme to abolish nuclear power was initially adopted by the SPD, and subsequently by the CDU, following Angela Merkel’s leadership of the party. This was compounded by the successive weakening of France. Since adopting the euro, the economy of the Fifth Republic has experienced a period of stagnation, exacerbated by the global economic downturn in 2008. Subsequent governments, lacking the necessary resolve, have acquiesced to the dictates of Berlin. Under Chancellor Merkel, dubbed the “Empress of Europe” for good reason, Germany imposed its model of energy transition on the entire Union. Even the French have lost faith in nuclear power plants.

Hope in America

This has not been difficult, as Berlin’s growing role has coincided with reports from the scientific community that global climate change is accelerating. Meanwhile, generation of electricity from renewable sources does not result in the release of carbon dioxide emissions. While nuclear power plants also do not create emissions, their existence undermined Chancellor Merkel’s planned Energiewende. Cheap gas from Russia, distributed within the EU via German intermediation, served as a strategic asset, further consolidating Berlin’s dominance. The trap was ready to spring: a continental-scale energy system had been built, dependent on the Kremlin’s rationality and willingness to cooperate. Putin was well aware of this fact, which explains his high bid in 2021–2022. He was unaware that most EU members did not understand the intricacies of the trap created by Germany, including the Germans themselves.

Hence the bewilderment on both sides at what happened next. Russia has become embroiled in a war that it cannot win, and the European Union is struggling to resolve an energy crisis. New plans are now being proposed, but these carry the same level of risk as reliance on Russian energy resources. Projects involving the construction of a large network of hydrogen pipelines and hydrogen extraction plants can be included in this category. As with RES, the devil is in the details. Indeed, it is feasible to extract hydrogen from water using free energy generated from wind and sunlight. But the specifications are determined by the materials utilised in the construction of the electrolysers and the associated operating costs. According to a report by the Strategy& think tank titled Navigating the Global Hydrogen Ecosystem, the cost of hydrogen derived from water using RES is currently two to three times higher than that extracted by chemical reaction from natural gas. However, this is also a more expensive “filler” than the gas itself. Germans have a strong affinity for gambling. After all, they not only shut down their last nuclear power plants, but also proceeded to dismantle them. “The dismantling of our five nuclear power plants is practically irreversible”, Jörg Michels, representing the energy group EnBW, told the daily Augsburger Allgemeine on 5 December 2024. The Holy Grail of Europe is now hydrogen.

The European Union’s actions over the last 25 years have resembled Hernán Cortés’ conquest of the Aztec Empire in 1519. Setting off with a small group of adventurers to conquer the Aztec Empire, Cortés destroyed all his ships, giving his subordinates a choice: fight for victory or die. Although the determination of the conquistadors is not evident in modern Europe, any possibility of retreat has also been eliminated. It is not feasible to resume large-scale coal mining or coal-fired power generation. Existing nuclear reactors are predominantly aged and depleted. The construction of new ones would require significant time and financial investment, as well as the expertise of companies specialising in this field. However, there is a shortage of such companies.

Meanwhile, Berlin is still trying to block the transfer of EU funds for the development of this energy branch (resistance to include them in the EU taxonomy). This is further compounded by the tax surcharges (including the EU ETS) imposed on electricity producers who emit CO2. Large-scale energy storage and cheap hydrogen are, for the time being, issues for the rather distant future. They are reliant on the emergence of cutting-edge technologies that can transform expensive concepts into cost-effective realities.

In this situation, “drill, baby, drill” may be the last resort strategy for EU countries in the years to come. However, knowing the American knack for multiplying profits, it is likely they will charge Europe handsomely for it. ©Ⓟ