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World Observer

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The current energy issue cannot be solved by investing in gas

ByJerzy Nawrocki

Oct 25, 2021

Much of the world is currently experiencing an energy crisis as a result of rising gas prices. Increased investments in gas production, infrastructure, and gas-fired power plants appear to be potential solutions to the worldwide gas shortage. According to new research from the NewClimate Institute, continuing to rely on gas is more probably to be an expensive diversion that exacerbates the problem while compromising energy security and climate mitigation efforts. Renewables and electrification are the best solutions in the vast majority of circumstances.

Natural gas customers all around the world are in the middle of a global energy crisis. Gas prices have soared to new highs – 280 percent in Europe and 100 percent in the United States since the beginning of the year – as a result of expanding LNG infrastructure. This comes as the northern hemisphere prepares for a possibly cold winter when demand for heat is expected to increase. Such a price increase puts tremendous strain on the region, resulting in higher energy bills for both industrial and residential customers. Large corporations have warned that increasing gas prices in the aftermath of the COVID-19 problem could hamper economic recovery, as manufacturing costs rise and production in both Europe and Asia is reduced for energy-intensive activities. In the United States, household gas spending is expected to increase by 30% this winter. Policymakers are looking for solutions out of the crisis, but they’re up against geopolitical maneuvering and call for greater climate ambition.

More gas creates more uncertainty in terms of energy security.

Policymakers and financial firms should be wary of supporting gas-related investments as a remedy to the crisis, as it frequently provides a misleading or just short-term solution. Further expenditure in import infrastructure in Europe, for instance, which lacks major domestic gas reserves and relies on imports, will further increase Europe’s exposure to volatile international gas prices – particularly if the Asian market keeps buying at any price. Some in Germany are pressing for the authorization of Nord Stream 2 as soon as possible in order to enhance supply. This has the potential to both encourage and lock in further gas investments downstream, increasing the country’s reliance on imports in the long run. The only option to reduce dependence and increase energy security is to reduce the role of gas via energy efficiency measures, end-use electrification, and rapid renewable energy deployment.

Costs: More gas equates to increased energy costs.

At these high gas prices, the appeal of renewable alternatives is self-evident — just ask anyone who owns solar panels, an electric car, or electrified equipment like heat pumps and electric boilers. Even once the current crisis has passed, renewable energy’s cost advantage (or, conversely, the economic risk linked with fossil gas) will remain and grow: While the cost of renewable energy technology continues to fall, the cost of gas extraction and transportation sets a price floor under which production is no longer profitable. Renewable energy is already economical than gas-fired power in most circumstances; in over half of the world, it is cheaper to produce electricity from renewable power plants than it is to run current fossil fuel plants.

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