Wednesday, October 23, 2013

Energy diversification between US and EU

It is a well known fact that United States and Europe have been following different energy policies over the past 20 years or so. The diversification in their energy goals sees the US leading 'the shale gas revolution' while on the other hand Europe continues to invest heavily in renewable energy sources such as wind and solar. This diversification is according to Marianne Haug of the University of Hohenheim, a good thing for the development of both energy sources.

In her latest study she argues that although the United States and European Union continue to be committed to common energy goals which include energy security, environmental sustainability and economic competitiveness, there is also the relative priority given to each which has changed substantially since the early 1990s. The reasons for these changes include domestic issues, geopolitical concerns, resource diversification, emerging energy markets, new government policies, public opinions and the choices of investors.
Investments in renewable energy. US investments dropped significantly after shale gas resources become viable solution for energy production challenges.
In order to further confirm her conclusion Haug pointed to the example of the Kyoto Protocol, describing it as a turning point for the differences in energy policy. Before the 1997 agreement in Kyoto, which US failed to ratify, energy security was considered the most important of all energy goals. However, after the Kyoto protocol, European countries gave higher, if not equal, priority to environmental concerns and have entered into partnerships beyond the United States in efforts to develop low-carbon technologies, which include windmills, photovoltaic units, solar thermal hot-water installations and rapeseed biofuel. The EU also developed emission-trading systems, biofuel targets, energy-efficiency guidelines and standards, which all contributed to stimulating the market for renewable energy sources.

In the United States, the general public is not that committed to the potential dangers of continued fossil-fuel use which partially explains why public and private investors have spent heavily on shale gas extraction, mostly building on existing fossil-fuel technology. Many energy experts argue that the ability to extract shale gas efficiently could be an “energy game changer” for the US and other countries by not only contributing to energy security but also accounting for lower prices. On the other hand, the shale gas industry is still in its infancy in Europe, though there are some signs that this might soon change, particularly in UK.
US natural gas production: current and projections. Shale gas will be very important part of natural gas production in US in the future. 
Those two completely different approaches in fulfilling energy demands obviously results with different market prices for energy sources. Paolo Scaroni, chief executive of the Italian oil and gas group ENI, warned that European economies face a long-term structural challenge of competing with industrial operators in the US, which now enjoy far cheaper gas and electricity prices than those prevailing across the EU.

Widely available shale gas is much cheaper energy option and some European countries are already concerned that some industries could move from EU into US to take advantage of cheaper energy sources. This is mainly focused on chemical, steel and fertilizer producers which are particularly exposed to high gas prices across Europe. There are predictions that import of liquefied shale gas from US into EU will reduce gas prices in EU for 20-30%, but those prices will still be much bigger than in US.

This parallel development of shale gas in the US and renewable energy source in Europe diversifies and enriches the world's energy-supply choices. On global level, this means that there are complementary technology pathways that enable limiting import dependence for both EU and United States and contribute to secure, affordable and sustainable energy for all. It is also expected that further cooperation between the transatlantic partners would scale up the development of both forms of alternative energy for the benefit of the global energy supply. 

No comments: