Europe’s renewable energy paradox

Climate Focus

By Sharon Kimathi, Energy and ESG Editor, Reuters Digital

Hello!

Today's newsletter covers the "renewable paradox at play", according to one chief investment officer.

The U.S.-Israeli war against Iran and the related surge in fossil fuel prices have driven some politicians to push for more renewable energy in Europe.

But market volatility, an expected rise in interest rates and sluggish permitting are making investors wary.

Nearly a month into the conflict that caused the biggest energy market disruption ‌in history, countries reliant on oil and gas imports are seeking alternatives and trying to scale up green energy to ensure supply security for the future.

"There's a renewable paradox at play," said Luca Moro, chief investment officer at energy transition fund SpesX, as higher power prices boost earnings but higher capital costs can "undermine project economics".

While the longer-term shifts are clearer, the shorter-term picture is mixed.

Right now, surging prices - crude is up more than 50% and gas more than 60% since the war began at the end of February – are driving up inflation and interest rate expectations.

In the long term, the European Union's Grid Package, designed to fast‑track projects, and an additional 75 billion euros ($87 billion) in clean‑energy financing from the European Investment Bank will provide further support.

Europe's politicians already sought to scale up renewables - which was already a priority because of the Ukraine war. But much ⁠will depend on how quickly they allow new projects to go ahead.

The bloc aims to conclude talks to speed up the pace of permitting for grids, renewables, storage and recharging stations by the end of the year, as deployment rates are well behind target.

Analysis by trade group SolarPower Europe last July said permitting delays can be as long as four ⁠years. A report by its peer Wind Europe in February this year said permitting was getting slower in most of the bloc.

Click here for a detailed comment piece on this paradox by Reuters' energy columnist Ron Bousso. He writes about Europe's greater renewables capacity and a more diverse pool of gas supplies compared to four years ago, but how the region still enters this crisis with a heavy dependence on oil and gas imports.

Thailand's fishing industry is grinding to a halt as diesel prices soar due to the U.S.-Israeli war on Iran, leaving many trawlers already docked, and others mere days away from stopping. Fishermen warn they can't cover crew and family costs, threatening fish supplies. Thailand exported $7 billion worth of fishery products in 2024. The country's finance minister said that the government is preparing a package to support fishermen, including biodiesel and palm oil to prevent further price surges. 

Fishermen transfer a container of catch from a trawler to a truck at a pier in Samut Sakhon province, Thailand. REUTERS/Chalinee Thirasupa

In keeping with today's focus on the unintended consequences of the rising gas prices driving a push towards renewables, electric vehicle sales are booming across Europe, triggered by the war in Iran, online car platforms told Reuters. Petrol prices in the European Union rose 12% to 1.84 euros per litre between February 23 and March 16, European Commission data show, and the pain at the pump is accelerating the shift away from combustion engines. Click here for the full story.

Sticking with Europe, Germany has set out ‌plans to help it meet 2030 climate targets and reduce its dependence on volatile fossil fuel imports. Europe's biggest economy will make 8 billion euros available to fund measures such as expanding wind power capacity and boosting EV sales and aims to reduce greenhouse gas emissions by at least 65% from 1990 levels by 2030 and to be climate neutral by 2045. So far, the reduction is only about 48% and experts say existing policies are insufficient.

Meanwhile, India is aiming to cut emissions intensity by 47% from 2005 levels by 2035 while expanding clean energy capacity under climate pledges linked to the Paris Agreement, it said this week, targets described ‌by analysts as conservative. The world's fastest-growing major economy aims to lift the share of installed clean power capacity to 60% over the next decade, from 52.6% now.

Lastly on today's Climate Buzz is a more science-driven story which caught my eye as researchers are figuring out how to understand how tsunamis originate and propagate, using information from a strong earthquake struck off Russia's Kamchatka Peninsula last year in order to help improve their understanding of future tsunamis and earthquakes ‌at subduction zones. Click here for the very insightful scientific findings.

Sometimes you need a good whale-related story to lift your mood and we don't just have one, but two for you today!

Click here for a video on rescuers attempting to free a humpback whale stranded on a beach in northern Germany. Click here for a heart-warming story on the power of female friendship for future sperm whale mothers, as biologists observed how multiple adult female sperm whales surrounded the mother when she gave birth, then collectively hoisted the calf out of the water as the newborn took its first breaths.

Europe's clean‑energy paradox is in focus as the Commission urges governments to quickly refill gas storage for next winter, with the Iran war disrupting global fuel markets. European gas prices have surged over 70% since the U.S.-Israeli war with Iran began on Feb. 28, after the closure of the Strait of Hormuz and Iranian attacks that hit 17% of Qatar's LNG export capacity.

The Commission will also encourage energy savings, such as the use of public transport, housing renovation, and energy efficiency in industries.

That's how much‌ forest clearing is done during beef production to open space and expand agriculture, according to details of a study by researchers from Chalmers University of Technology in Sweden. Click here for the full story.