2021: the failed beginning of the “green transition”

MOSCOW, 07 Jan 2022, RUSSTRAT Institute.

On July 8, 2020, the European Commission published the final version of the EU Hydrogen Strategy. The main thesis of the strategy was to reduce the EU’s dependence on fossil fuels and achieve so-called “carbon neutrality” by 2050.

European Commissioner for Energy Kadri Simson, commenting on the publication of this document, stated the following: “climate neutrality in 2050 can be achieved only with the complete abandonment of fossil energy resources. All partners supplying us with these types of fuel should take this into account.” Taking into account the fact that the EU supplies 32.2% of the total volume of gas required by the EU to the Russian Gazprom, the addressee of this statement was quite obvious.

Against the background of warnings to gas suppliers, the European Commissioner complimentedly outlined options for cooperation with partner countries such as Morocco and Ukraine in supporting cross-border hydrogen trade.

Based on the hydrogen strategy, over the next 30 years, the European Union is supposed to completely eliminate all transport on its territory that uses petroleum products or natural gas in any form as fuel. We are talking not only about automobile, but also railway, river, sea and aviation transport.

It is supposed to get rid of hydrocarbon fuel in all its forms in the production of thermal and electrical energy for agriculture, industry and all public infrastructure, including residential.

The European Commission intends to transfer the energy-consuming structures and facilities described above exclusively to the use of hydrogen fuel cells – or electricity from renewable sources, including biofuels. Incineration of sorted household waste and nuclear energy were mentioned as additional options that could be considered in case of extreme need.

The scale of the ambitions of the EU strategy is underlined by the fact that wind and solar power plants should become the basis of the energy of the future Europe. Since the wind and the sun, with all their renewability, are unable to produce energy on schedule, the imbalances inevitable with such an energy structure are planned to be compensated for by various types of hydrogen.

The EU strategy specified as many as 7 types of hydrogen, differentiated depending on the method of its generation. For example, hydrogen that is obtained by electrolysis from water using electricity obtained from a renewable energy source is considered the most “high-quality”. Hydrogen extracted from natural gas, followed by carbon dioxide capture, is considered less preferable than the most “high-quality” hydrogen, etc.

The results of the first year of actions in line with the adopted strategy were not particularly impressive, although in January 2021 the European media was still optimistic. By the end of 2020, 27 EU countries for the first time received more electricity from renewable energy sources than from fossil sources – 38% versus 37%, Deutsche Welle reported with reference to the British analytical centre Ember and the German Agora Energiewende.

In a joint report published on January 25, they declared that they had reached “an important milestone in Europe’s transition to clean energy”. Especially in Germany, where the share of renewable energy in 2020 exceeded 50% for the first time.

However, the same analytical review described the factors that ensured the superiority of renewable energy over traditional energy. The demand for electricity in the EU decreased due to the pandemic and the subsequent recession, which caused 571.9 terawatts of energy to be produced in Germany instead of 609.4 (in 2019), and 524.9 TW in France instead of 562.8 TW.

In addition, the main factor for the success of renewable energy sources was not the growth of their scope of application, but the reduction of the base of traditional energy – due to the mass closure of coal mines, production at coal-fired power plants fell by 20% over the year, and electricity production from gas fell by 4%.

In January 2020, European publications came out with headlines like “The European coal market has no prospects”. After 10-11 months, it turned out that the prospects for the coal and gas market, on the contrary, are exceptional – but the strategies of “green transitions” have received a serious economic blow.

500 euros per megawatt

Strategies to reduce the “dirty” electricity production in the EU include abandoning not only coal, but also nuclear power plants. At the end of 2021, two nuclear power units in France were taken out of operation and 13 coal-fired thermal power plants in Germany were suspended.

In combination with a sharp cold snap and media hysteria about the certification and launch of Nord Stream 2, the markets managed to get “nervous” and the cost of electricity rose to unprecedented heights. In France, stock prices reached €443 per MWh, in Germany a little less – €432 per MWh. Other countries also corresponded to these indicators – in Belgium and Austria the cost exceeded €430 per MWh.

At the same time, the exchange price of gas increased – on December 21, 2021, the price of $2,000 per thousand cubic meters was fixed on the London ICE 21 exchange. And, although such a price did not last very long, it became clear that such a price is possible in principle.

Similar processes occurred with other types of “dirty” fuel. In March 2021, with reference to Eurostat, it was reported that the volume of coal imported into the EU countries due to the decline in economic activity and the forced shutdown of coal-fired thermal power plants in 2020 decreased by 34.5 million tons, to 53.6 million tons. In particular, supplies from Russia decreased by 10.2 million tons to 37.8 million tons. In September 2021, Bloomberg, with reference to sources, reported on requests from European energy companies to increase coal supplies.

Against the background of the extremely low level of occupancy of European underground gas storage facilities and the instability of renewable energy generation by wind farms, coal turned out to be an extremely attractive alternative. The same conclusions were reached in the UK (which left the EU), where, despite the protests of environmental circles, they began, instead of closing, planning to expand production from coal mines.

On November 22, 2021, Bulb, one of the largest energy companies in the UK, was declared bankrupt. To neutralise the negative consequences of the shutdown of the company providing energy to 1.7 million people, the government was forced to develop a special plan.

By this time, at least 25 energy supply companies had gone bankrupt in Britain. These are relatively small companies, but each such bankruptcy has led to the need to find new suppliers and reconnect subscribers in a short time. For example, after the bankruptcy of Utility Point and People’s Energy, the authorities had to solve the issue of transferring about 0.5 million households.

On December 21, the German Neckermann Strom AG, which supplied environmentally friendly energy and gas throughout Germany, went bankrupt.

So far, there is no reason to believe that record electricity prices in the EU and Britain really reached the ceiling last autumn, and will not be able to break new heights. If the industrialised countries of the EU intend to get out of the post-bubble “depression”, they will need energy resources. And the base of traditional energy sources is further reduced.

On December 31, the Associated Press reported on the shutdown of three of the six still operating nuclear power plants, which removed 6.4 GW from the country’s power system – and this is not the limit, since the current leader of Germany Olaf Scholz announced that after 2022 there will be no operating nuclear power plants in the country. Then the authorities plan to abandon the use of coal by 2030.

However, the question of energy security of the European Union’s economy remains open, and “green energy” will not be able to answer it in the foreseeable future. Moreover, there are doubts that this answer can even exist within the framework of existing concepts.

Without a plan and technology

In the EU, there were several regulatory documents on the “green transition” that did not coincide with each other in quantitative and even qualitative parameters. In addition to the EU Hydrogen Strategy, up to July 1, 2021, there was a Directive on Renewable energy sources from 2009, expanded in 2018. Some of its provisions are even more stringent – for example, by 2030, 32% of the total volume of electricity produced in the EU should be produced using renewable energy sources (RES).

This directive contradicted the EU Energy and Climate Change Program adopted in 2014, according to which renewable sources should account for 27% of EU electricity by the same year 2030. 5% may seem a small spread, but if we take absolute figures, the situation looks more serious.

In 2020, the largest EU economies, Germany and France, produced more than 571 and 524 terawatts of energy, respectively. 5% of this volume is a serious enough energy capacity to write it off as an error between the plan and the fact. The cancelling of the Directive of 2009 quite clearly shows the difficulties with the implementation of the “green transition” – at least in its maximum part.

In 2011, the EU adopted the Energy Policy to 2050, according to which the share of “renewable” energy should be 70% by 2050. Up until the last moment, these documents were valid simultaneously, and most of them are still valid. And this makes it obviously impossible to implement them accurately: by 2030, the EU should produce 27% or 32% by RES, and by 2050, the share of RES should be either 70% or 100%, according to the EU Energy Program.

Against the background of regulatory documents being implemented in parallel with conflicting numerical indicators, the absence of technical and economic justifications for the achievability of each of them is striking. This does not prevent the documents from containing an investment component. The “investment” section of the EU Hydrogen Strategy states that “by 2030, investments in electrolysers can range from 24 to 42 billion euros”.

In addition, during the same period, “220-340 billion euros will be required” to expand and directly connect “80-120 GW of capacity” for the production of solar and wind energy to electrolysers. According to the strategy, investments in production facilities in the EU will amount to 180-470 billion euros by 2050. Even greater investments will be required to modernise the power grid, in this area it may take from 1.5 to 2.2 trillion euros.

The huge spread in numbers is not surprising, given the overall low level of elaboration of the EU’s publicly presented strategic documents in terms of energy.

In 2021, the first year of the “green transition” that began, there was no plan answering the question: how, in fact, a huge amount of hydrogen will be produced, and along which highways it will be delivered to power plants using it as fuel. The fact is that now there is no technical solution at all that allows organising the delivery of significant volumes of hydrogen, comparable to the supply of natural gas, over long distances.

The main problem for hydrogen logistics in general is the molecular parameters of hydrogen, which allow it to seep through the materials from which storage and transportation systems are made at one speed or another – the average loss rate at a distance of 2.5-4 thousand kilometres is 20-30%.

This entails the need to create and implement a palette of materials suitable for hydrogen infrastructure – for example, carbon fibre materials that are more efficient than metals for hydrogen retention. In addition, according to the studies conducted, different amounts of energy are required to transfer an equal amount of energy in the form of natural gas and hydrogen through the same pipeline. For hydrogen, it needs about 4.6 times more.

During the combustion of hydrogen, more than 2.5 times more heat is released than that of natural gas, which theoretically makes hydrogen the preferred type of fuel. However, outside of stock market speculation, the cost of natural gas production is several times cheaper and simpler than hydrogen production.

One of the optimistic forecasts of the IEA states the cost of hydrogen production in 2060 as $1,200 per ton – but even in this case it is $75 more expensive than the equivalent amount of natural gas in terms of energy content.

The most “high-quality” or “green hydrogen”, which according to the EU strategy should be obtained by electrolysis from water, using electricity from solar or wind batteries, requires appropriate infrastructure – first of all, the production of distilled water. In this case, the cost of a ton of hydrogen for the consumer will be about $1,500, which will obviously be inferior to natural gas.

Lacking a detailed plan for restructuring the production of the economy and, by all indications, an economic justification for the process both in general and in detail, the European Union began to implement the “green transition”. The only provisions that have been implemented so far have been the closure of part of nuclear power plants and coal mines – despite the marked energy hunger in some regions of Europe. And, based on the public statements of the new German government, with all the destructiveness of such a policy, it will continue.

It is worth noting that one of the indispensable conditions for the implementation of the “green transition” in the form in which it is described in EU regulatory documents is the creation of sufficient energy-saving capacities. They could accumulate energy from “hydrogen” energy for use as a compensator in case of unavoidable imbalances in the operation of wind or solar energy. However, so far there has been no announcement about the launch of programs to create such capacities – or at least their planning or development.

Despite the obvious failure in the implementation of the “green transition”, the EU managed to announce another way to achieve “carbon neutrality” – a tax on energy resources and goods whose production leaves a “carbon footprint”. The emissions and taxes reporting scheme will work in a test mode from the beginning of 2023, and it is planned to start collecting the tax itself from January 1, 2026.

According to RBK, suppliers of iron, steel, aluminium and fertilisers from Russia will have to pay about €1.1 billion a year – about 16% of the cost of goods. It seems that the EU will try to collect such a tax regardless of how much the real results of the “green transition” in 2026 will correspond to any of the positive forecasts.


1. Despite a significant number of regulatory documents indicating the indicators of the “green transition” for the next 30 years, there are no substantive plans with technical and economic content even a year after the start of the ambitious plan.

2. When implementing the “green transition”, the imbalance of the system is clearly observed – EU countries successfully close power plants operating on traditional types of energy carriers, without creating sufficient compensation in the field of renewable energy. This creates a constant threat of energy crises at times of peak load, to which the existing infrastructure of wind and solar generation cannot be technically adapted.

3. Even the most optimistic scenario of the cost of hydrogen production requires huge investments and technical solutions that are currently not available in a form suitable for industrial mass implementation.

4. Gas remains the most adequate source of energy in terms of the balance of ecology, infrastructure and economy for the next few decades.

5. Given the extreme difficulty of implementing the “positive” part of the “green transition” – the construction of renewable energy generating capacities, we should expect an increase in its prohibitive part – especially in the part that amounts to additional taxation of suppliers of products outside the EU.

Institute for International Political and Economic Strategies – RUSSTRAT


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