Baker Hughes’ CEO Warns Of Three Hard Truths About The Energy Transition
Fossil fuels are here to stay. This is the message one oilfield major CEO had for those watching the surge of gas prices in Europe, some with trepidation, others with fascination. They are here to stay because they help ensure a country's energy security. "We think there's three hard truths," Simonelli told CNBC in an interview this week. "Firstly, we've got to work together, accelerate the move towards decarbonization and also eliminating emissions. Secondly, hydrocarbons are here to stay … and natural gas, in fact, is a key element. And thirdly, we've got to do it together, collaborate and actually adopt the new technologies that are available."
Some would say the current energy crisis in Europe is sufficient proof that there is something not quite right with the way the EU and the UK approached the energy transition. OPEC's secretary-general Mohamed Barkindo, for instance, told CNBC there was a new premium emerging in energy markets that he called "the transition premium." What this means is, essentially, that the energy transition is making energy more expensive despite promises for affordability.
Others, however, are careful to not blame anything related to the energy transition of renewables. The International Energy Agency earlier this week mentioned "several weather-related factors" among the reasons for the gas price spike in Europe. "These include a particularly cold and long heating season in Europe last winter, and lower-than-usual availability of wind energy in recent weeks," the agency said.
However, its head Fatih Birol was quick to point out that it would be "inaccurate and misleading to lay the responsibility at the door of the clean energy transition," in what looks like a perfect example of the growing unwillingness among international organizations to challenge the image of renewables even in the face of hard evidence that in some cases they cannot live up to their promise.
Some go even further.
A CNN article, for instance, argues that the solution to the wind drought in the UK—which contributed significantly to the country's dire energy situation—is building more wind farms, in different places, because "the wind will be blowing somewhere," according to a Manchester University professor in international politics.
Leaving aside questions around the qualifications and expertise of different commentators on the topic, it seems that challenging anything about the energy transition is highly frowned upon. Yet, in the face of an energy crisis brought about primarily by insufficient supplies of gas, it is hard not to challenge the transition or rather the way it is being done.
Gas was initially considered a bridge fuel—the bridge being between the fossil fuel era and the post-fossil fuel, renewable energy era. However, as warnings about the changing climate became louder and governments became increasingly ambitious in their emission-cutting targets, gas began to be struck out in energy plans in both Europe and the United States. In light of the energy situation in Europe right now, this was probably a premature move. It was not the first one, and it might not be the last one. Because high gas prices are already driving up demand for coal and the EU ambition to be the greenest of the green is unraveling.
"The carbon price of using coal has driven up demand for gas. But now high gas prices are driving up demand for coal," wrote Cambridge University political economy professor Helen Thompson for the Financial Times this week. "If there were not serious intermittency problems with wind and solar and battery storage were further advanced, this would not matter. In reality, the absence of much wind in northern Europe this summer is consequential."
This intermittency is the elephant in the renewable energy room. Ignoring it for the sake of political correctness and towing the party line will have—and already has—consequences. It is because of these consequences that fossil fuels are likely to keep their place in the global energy mix for quite a while yet. It's a hard truth that needs to be digested if the energy transition is to succeed.