ENERGY & ECONOMIC WARFARE: A Case for Domestic Production under Democracy

Share:
Photo by Christian Dubovan on Unsplash

Russia’s control over a significant portion of European energy supplies has currently been a key lever for its president, Vladimir Putin. The EU has reduced the share of its energy coming from Russia from around 40% to 20%, according to Belgium-based think tank Breugel. However, the move caused a spike in energy prices, which were already increasing before the invasion. This has lead to a crisis in several countries. The Wall Street Journal has gone as far to describe the slashing of energy supply from Russia to Europe by Putin’s government as an “economic weapon.”

Following a period of a reduced energy supply from Russia, engaged in economic warfare with large states, such as the UK, the USA, and the Franco-German leadership of the EU (all of whom imposed economic sanctions on Russia), it has been predicted that the Russian government has apparently decided to make its next move in the current battle, by cutting off the supply of gas completely.

This is also the view of French Economy and Finance Minister Bruno Le Maire, warning that there is a strong chance that Moscow will totally halt gas supplies to Europe. Germany’s economy minister, Robert Habeck, shared a similar view, describing the potential of a “‘nightmare scenario.” Almost half of Germany’s households rely on gas heating, and, in commerce, chemical, steel, glass and paper producers are Germany’s leading industrial gas consumers. Cutting gas supply to aluminium plants by even 30% would mean half of them would stand idle, industry group Aluminium Deutschland says. Furthermore, effects would ripple as far as food and porcelain production. Yasmin Fahimi, head of the German Federation of Trade Unions, has said that “entire industries” could collapse from insufficient gas supply. He also claimed that millions of workers’ livelihoods in Germany are at stake as a result.

Economists have also predicted that Europe faces a rising risk of recession because of rising oil and gas prices, amid the previously mentioned concerns that Russia could turn off supplies completely. Europe’s economy will be hit by a variety of factors including falling demand in the US — its biggest export market — the continued fallout from Russia’s invasion of Ukraine and related increases in food and energy prices, according to Nomura, a Japanese investment bank with significant operations in London. Nomura said it expected the European economy to start contracting over the course of the second half of 2022 and for the recession to continue until the summer of 2023, with a total decline of 1.7% of GDP. Kay Neufeld and Jonas Keck, economists at the Centre for Economics and Business Research, said Russia’s invasion of Ukraine had created “a veritable pan-European crisis” and said there was a least a two in five chance of a European recession.

Predictions of fuel rationing in the coming months, particularly in Ireland, a country which has played no direct role in this present span of economic warfare, are likely to come true, according to leading economists, as well as the Central Bank of Ireland and Mairéad McGuinness (the EU Commissioner and former Fine Gael MEP). The Business Post has also reported that high energy industries in Ireland could be asked to shut down or reduce operations due to the unfolding crisis in Europe.

The processes, debates and variants of domestic energy production in Ireland has for many years been a source of a great deal of controversy, be it the extraction of oil on the coastlines, turf cutting in the midlands, or the construction of wind turbines across the country. However, we ought to listen to the commentary made by Don Moore, former head of ESB International. Moore, speaking on Today with Claire Byrne, said that Ireland is “very poorly prepared” for gas shortages because of a lack of gas storage. Moore claimed that Ireland had chosen to “follow a very risky route” by not building an import facility for liquefied natural gas. He also stated that while the country had been presented with the opportunity in the past to create storage, instead, “we chose not to do it.”

Moore described Ireland’s decision not to build an LNG terminal off the Irish coast as “quite extraordinary” and that “we don’t have any gas storage in Ireland, which is quite unusual because nearly every other European country has gas storage.” He also said that Ireland relies on external sources for the other 70% of supply which, he believed, left the country very poorly prepared for any shortage of supply this winter.

This analysis by Moore clearly displays how our heavy dependence on the importation of energy sources from abroad is colossal weakness to our the economy and the welfare of all. Ireland is one of the most import dependent countries in the EU, according to the Sustainable Energy Authority of Ireland’s (SEAI) Energy Security in Ireland 2020 report, largely owing to its reliance on imported oil and gas. As we have established, the energy crisis has been (and will continue to be) a major detriment to improvements regarding the cost of living, compounding onto existing problems relating to the provision and cost of housing, food, education, vehicle insurance, and more.

What can be done, then? As Moore has indicated, Ireland is not utilising its potential for the production and storage of energy. Therefore, this route must be explored, and Moore’s suggestions urgently should be acted upon. According to the SEAI, while Ireland is largely dependent on imports for its two largest energy sources, oil and natural gas, the majority of renewable energy used in this country is sourced at domestically. Although the country’s import dependency was approximately 70% per cent as of 2018, this was in fact a large reduction from an average of 89 per cent between 2001 and 2015, with the improvement mostly due to the production of gas at Corrib and increasing use of indigenous renewable energy.

The amount of electricity generated from renewables totalled 42 per cent in the year 2020, with wind accounting for 37 per cent of this. Non-combustible renewables such as wind and hydro make up a much larger share of electricity generated than fuel inputs, because they are considered effectively 100 per cent efficient.

An efficiency rating of 100% is simply remarkable by any measurement. However, the mistakes made from previous installations of these energy sources must be learned from. For example, the damage to both infrastructure, agriculture, services, and the environment as a result of the 2020 mudslide at the Meenbeg wind farm in Co. Donegal, as well as that at Derrybrien, Co. Galway, both attributed to the installation of wind turbines, was a disaster in terms of public perception and support for these types of initiatives. In the case of Derrybrien, the wind farm is currently being decommissioned. Overcoming the causes of these incidents will be a prerequisite to mass support for what are now, clearly, necessary initiatives.

Now, for the next part. Assuming we embark on the mass construction of these wind farms, what method of ownership and control should it come under? In Spring 2021, Spanish energy giant bought a majority stake in a portfolio of wind farm projects off the South and West coasts which were being developed. In November 2021, it was reported that an Asian-based renewable energy company is to build a huge wind farm off the south coast of Ireland, marking the second major Irish offshore wind investment in as many weeks. The firm said that its Irish wind farm will be funded largely by private equity investment.

Energy uses across much of the world have learned to simply accept their current utility rates, opting to try and change their own behaviours rather than demand that their bills can be lowered. According to researcher Izzy Hamilton, for many of us, we don’t actually possess the freedom to decide who provides our electricity or where it comes from. In most places, utility companies offer an entire package of electricity services and wield monopolistic power as the only provider of energy in an entire country or geographic region.

Hamilton, as well as Stanford University, have described electricity companies as classic examples of a natural monopoly. In the past, electricity was what economists call a natural monopoly because extremely high equipment costs kept new producers out of the market, and the average cost of providing electricity decreased with every new customer of a given established provider.

Under this arrangement, the power of the private market is much greater than that of the power of democracy. David Pomerantz, executive director of the Energy and Policy Institute argued that “in most states the monopoly electric utilities are some of the most powerful political players in that state.” This is because energy is a necessity in modern civilisation, and, therefore, private, multinational control of this particular resource has a major leverage over democratically elected governments.

What is the alternative, if any? Regional energy co-operatives, and/or a national energy co-operative, could provide the answer. At the Energy Ireland Conference, Martin Hill of the Munster Technological University’s Department of Electronics and Electrical Engineering, discussed the power of local communities to take hold of their own agenda and deliver much greater levels of energy self-sufficiency. Such initiatives, according to Hill, could drive the future uptake of renewable energy technologies.

Hill says that, under the current EU criteria, renewable energy communities involve groups of citizens, social entrepreneurs, public authorities and community organisations participating directly in the energy transition by jointly investing in, producing, selling and distributing renewable energy. Beyond the reduction of greenhouse gas emissions, EU policy makers believe there to be many other benefits that can be developed for the communities involved. These include economic development, the creation of new jobs, cheaper energy, self-sufficiency, community cohesion and energy security.

Regional authorities can also support the emergence of energy communities by providing financing, expertise and advice, and ensuring that regulatory issues can be easily understood and navigated. Discussing the role of prosumers in the evolution of Ireland’s energy landscape, Hill says: “We need distributed generation and we also need to see prosumers — people who both produce and consume energy — engaging in this project.”

Hill moves onto the impact of the EU’s North West Europe Energy Community Co-Operatives (ECCO) project in empowering local communities to become prosumers. At the core of the initiative is a commitment to encourage groups — particularly farmers — to develop renewable energy projects that are wholly sustainable. Another priority for the initiative is to join-up these various projects in a meaningful way courtesy of bespoke communications’ programmes. According to Hill, ECCO is a project that will be built from the bottom up.

In the light of the related, ongoing, Russo-Ukraine war, which is colliding with the war commemorations taking place in Ireland at this present time, we are hearing an awful lot about independence and democracy, but is this reflected in our energy policy? Energy co-operatives are founded on the basis of voluntary and open membership; democratic member control and economic participation. State-supported and/or state-owned domestic energy production by its employees and consumers would expand democracy from local and national elections to industry and the workplace, and build social capital, whereby value is controlled by its users and creators. Furthermore, this can address the democratic deficit and scale back the top-heavy, centralised system seen in economies where corporate capitalism, communism and fascism prevail. The alternative is a situation whereby value is exacted and the ownership of value created is exported, and potentially, in the future could come under the control of those who are cutting off the energy supply at this present time.

SOURCES:

  1. Ahlemeyer, K., Griese, K.-M., Wawer, T. and Siebenhüner, B. (2022). Success factors of citizen energy cooperatives in north western Germany: a conceptual and empirical review. Energy, Sustainability and Society, 12(1). doi:10.1186/s13705–022–00354–4.
  2. Benn, T. (1981). Arguments for Democracy; Edited by Chris Mullin. Google Books. Penguin.
  3. Brummer, V. (2018). Of expertise, social capital, and democracy: Assessing the organizational governance and decision-making in German Renewable Energy Cooperatives. Energy Research & Social Science, 37, pp.111–121. doi:10.1016/j.erss.2017.09.039.
  4. businessplus.ie. (2022). Central Bank warns Ireland faces energy rationing. [online] Available at: https://businessplus.ie/news/energy-rationing-ireland/ [Accessed 11 Jul. 2022].
  5. Capellán-Pérez, I., Campos-Celador, Á. and Terés-Zubiaga, J. (2018). Renewable Energy Cooperatives as an instrument towards the energy transition in Spain. Energy Policy, [online] 123, pp.215–229. doi:10.1016/j.enpol.2018.08.064.
  6. Collins, S. (2022). Mairead McGuinness: Europe could face fuel rationing next winter, warns Irish Commissioner. [online] Independent. Available at: https://www.independent.ie/news/europe-could-face-fuel-rationing-next-winter-warns-irish-commissioner-41776388.html [Accessed 11 Jul. 2022].
  7. Connolly, K. (2022). Germany braces for ‘nightmare’ of Russia turning off gas for good. [online] the Guardian. Available at: https://www.theguardian.com/world/2022/jul/10/germany-russia-gas-flow-permanent-halt-nord-stream-1-maintenance [Accessed 11 Jul. 2022].
  8. Cornell University (2015). Power To The People: Toward Democratic Control of Electricity Generation. [online] Socioeco.org. Available at: https://www.socioeco.org/bdf_fiche-document-4081_en.html.
  9. cs.stanford.edu. (n.d.). Natural Monopolies. [online] Available at: https://cs.stanford.edu/people/eroberts/cs181/projects/corporate-monopolies/benefits_natural.html.
  10. Cumbria County Council (n.d.). Starting a Co-operative. [online] Available at: https://www.cumbria.gov.uk/elibrary/Content/Internet/537/6379/6441/6497/41177102919.pdf.
  11. Danaher, D. (2022). Group’s anger at effort to halt windfarm decommissioning. [online] The Clare Champion. Available at: https://clarechampion.ie/windfarm-decommissioning/ [Accessed 11 Jul. 2022].
  12. Dodd, E. (2022). Fuel rationing in Ireland ‘could be a reality’ by autumn. [online] Buzz.ie. Available at: https://www.buzz.ie/news/irish-news/fuel-rationing-ireland-petrol-pumps-27292406 [Accessed 11 Jul. 2022].
  13. Doyle, G. (2021). An Exploration of the Factors Influencing their Development. Journal of Co-operative Studies, [online] 54(1), pp.7–23. Available at: https://arrow.tudublin.ie/cgi/viewcontent.cgi?article=1028&context=beschspart.
  14. Eckert, V. and Käckenhoff, T. (2022). Explainer: What happens if Germany’s Russian gas flows stop. Reuters. [online] 11 Jul. Available at: https://www.reuters.com/business/energy/what-happens-if-germanys-russian-gas-flows-stop-2022-07-11/ [Accessed 11 Jul. 2022].
  15. Energy Ireland. (n.d.). The potential for local energy co-operativeas in Ireland. [online] Available at: https://www.energyireland.ie/the-potential-for-local-energy-co-operativeas-in-ireland/ [Accessed 11 Jul. 2022].
  16. Hamilton, I. (2021). Why Energy Monopolies Don’t Work. [online] Climate-XChange. Available at: https://climate-xchange.org/2021/12/03/why-energy-monopolies-dont-work/.
  17. Healy, A. (2021). Spanish energy giant buys stake in Cork and Clare offshore wind farms. [online] Irish Examiner. Available at: https://www.irishexaminer.com/business/companies/arid-40221026.html [Accessed 11 Jul. 2022].
  18. Interreg Central Europe (2022). Energy Cooperatives. [online] Interreg Central EU. Available at: https://www.interreg-central.eu/Content.Node/ENES-ENERGY-COOPERATIVES.pdf.
  19. Jankowicz, M. (2022). Putin is likely to completely cut off Russian gas supply to Europe, French minister says. [online] Business Insider. Available at: https://www.businessinsider.com/russia-likely-completely-cut-off-europe-gas-supply-french-minister-2022-7?r=US&IR=T [Accessed 11 Jul. 2022].
  20. Jolly, J. (2022). Europe at risk of recession amid concerns Russia could cut gas supplies. [online] the Guardian. Available at: https://www.theguardian.com/business/2022/jul/04/europe-recession-risk-russia-gas-supplies [Accessed 11 Jul. 2022].
  21. Leali, G. (2022). France’s Le Maire: Total Russian gas cutoff is ‘most likely’ scenario. [online] POLITICO. Available at: https://www.politico.eu/article/frances-le-maire-russian-total-gas-cutoff-is-most-likely-scenario/ [Accessed 11 Jul. 2022].
  22. Libreri, S. (2022). Ex-ESB International boss issues gas supply warning. www.rte.ie. [online] Available at: https://www.rte.ie/news/2022/0711/1309627-energy-supply/ [Accessed 11 Jul. 2022].
  23. Meraay |, H. (2019). Energy Monopolies: The Dark Side of the Electricity Business (Episode 74). [online] Institute for Local Self-Reliance. Available at: https://ilsr.org/energy-monopolies-blp-episode-74/.
  24. Midwest Radio. (2022). Some Irish companies may have to start rationing gas this winter. [online] Available at: https://www.midwestradio.ie/index.php/news/59030-some-irish-companies-may-have-to-start-rationing-gas-this-winter [Accessed 11 Jul. 2022].
  25. Mooney, S. (2022). Explained: Where does Ireland get its energy from? [online] BreakingNews.ie. Available at: https://www.breakingnews.ie/explained/explained-where-does-ireland-get-its-energy-from-1330872.html [Accessed 11 Jul. 2022].
  26. O’Doherty, C. (2020). ‘Hard to overstate the hurt and anger caused’ — plans for second wind farm just days after devastating landslide. [online] independent. Available at: https://www.independent.ie/irish-news/hard-to-overstate-the-hurt-and-anger-caused-plans-for-second-wind-farm-just-days-after-devastating-landslide-39760839.html.
  27. Percival, G. (2021). Asian energy firm to build huge $10bn wind farm off south coast. [online] Irish Examiner. Available at: https://www.irishexaminer.com/business/companies/arid-40750362.html [Accessed 11 Jul. 2022].
  28. Reuters (2022). Jobs in Germany under threat if Russian gas taps stay off, trade union chief says. Reuters. [online] 11 Jul. Available at: https://www.reuters.com/markets/europe/jobs-germany-under-threat-if-russian-gas-taps-stay-off-trade-union-chief-says-2022-07-11/ [Accessed 11 Jul. 2022].
  29. Russia Slashes Gas Flows, Aiming Economic Weapon at Europe. (2022). Wall Street Journal. [online] 16 Jun. Available at: https://www.wsj.com/articles/russia-slashes-gas-flows-aiming-economic-weapon-at-europe-11655393254 [Accessed 11 Jul. 2022].
  30. Social Justice Ireland. (2022). The current cost of living crisis is an issue of adequate income. [online] Available at: https://www.socialjustice.ie/article/current-cost-living-crisis-issue-adequate-income [Accessed 11 Jul. 2022].
  31. Tarhan, D. (2017). Renewable Energy Co-operatives and Energy Democracy: A Critical Perspective. [online] Research Case. Available at: https://www.researchgate.net/publication/317369738_Renewable_Energy_Co-operatives_and_Energy_Democracy_A_Critical_Perspective.