Europe’s Masterclass on What Not to Do

The trajectory for the nation’s electricity supply is alarming. Reserve margins are rapidly eroding, power demand is soaring and the price of electricity has jumped nearly 30% since 2019. With the U.S. Environmental Protection Agency keeping its boot on the neck of the power sector and the Department of the Interior deciding in the 11th hour of the Biden administration to prohibit all future coal leasing in the Powder River Basin, there’s ample room – to put it mildly – for a policy course correction.

It’s not hard to envision this trajectory’s destination, particularly because it’s playing out right now across the Atlantic. And just how are things going over there?

Not good, dear reader. Not good at all.

In Britain, where the last coal plant was closed this year with the fanfare of a royal wedding, electricity prices are the highest in Europe, fully doubling between 2010 and 2024. They are now, on average, 175% higher than the average price of electricity in the U.S.

The price of electricity for Britain’s industrial users is astoundingly nearly three times more than the average paid by competitors in the 14 Western European E.U. member states. And to be clear, electricity is not cheap in the E.U.—far from it. The deindustrialization of Britain and Europe from eye-watering energy prices is well under way.

As Bloomberg’s energy and commodities columnist, Javier Blas, recently observed, Europe’s unwillingness to grapple with its energy policy failures has set up, “another winter of high prices, not just for gas but also for electricity, further darkening the future for energy-intensive companies in the region.” He added, “rarely a week goes by without a major manufacturing sector announcing plant closures, job losses and write-downs worth billions of euros.”

Dunkelflaute

The insanity of Europe’s energy policy is perhaps best summed up with the regular, self-made crises of “dunkelflaute,” or dark doldrums, when gray windless weather all but capsizes the continent’s power sector.

Northwestern Europe has already experienced two such episodes this fall, the first of which, early in November, lasted 12 days. On the third day, German wind power output plunged to less than 0.2 GW, compared to an installed capacity of roughly 70 GW. Coal was used to fill the yawning gap—coal capacity, like the German nuclear power fleet, the nation is determined to close.

In Britain, wind farms were only able to meet 3-4% of the U.K.’s electricity during peak hours of demand, with gas-fired plants instead fired up to meet around 60% of demand.

So concerning was this 12-day dunkelflaute that the CEO of RWE, Germany’s multinational power company, took to social media begging for more dispatchable power. He pointed out that even with firing up Germany’s remaining coal fleet and relying heavily on power imports, Germany would have been short 10 GW of power capacity if the same wind conditions had hit during peak conditions in January when power needs are typically highest. He wrote, “and in Germany (for years) we have been acting as if the question of adding secured power is something that can be postponed. We can already see very clearly today what happens when power is switched off and no backup is provided for renewables.”

Germany has spent around €500 billion on the transition to renewable power only for those sources to be of little use multiple times a year. There’s a lesson here if anyone is willing to learn it.

A rapid and decisive pivot in U.S. energy policy couldn’t come fast enough. Affordable, reliable power is the very foundation for economic prosperity and security. Rushing headlong into power shortages, soaring prices and self-made reliability crises is a mistake we don’t have to make. And yet, it’s exactly where we were headed.