Europe’s Energy Crisis Was Created by Political Interventionism, by Daniel Lacalle

Markets work extraordinarily well if you let them. From Daniel Lacalle at dlacalle.com:

An energy policy that bans investment in some technologies based on ideological views and ignores security of supply is doomed to a strepitous failure.

The energy crisis in the European Union was not created by market failures or lack of alternatives. It was created by political nudging and imposition.

Renewable energies are a positive force within a balanced energy mix, not on their own, due to the volatile and intermittent nature of the technology. Politicians have imposed an unstable energy mix banning base technologies that work almost 100% of the time and this has made prices soar for consumers and threatened security of supply.

This week, Ursula Von Der Leyen, President of the European Commission, gave two messages that have grabbed many headlines. First, she announced a strong intervention in the electricity market, and then she stated at the Baltic Sea Energy Security Summit the proposal to increase renewables to 45% of the total generation mix by 2030. She considers that this is not an energy crisis but “a fossil fuel crisis.”

However, Ms Von Der Leyen’s messages have two problems. Europe’s energy crisis is due to intervention at a massive scale. Furthermore, massively increasing renewables does not eliminate the risk of dependence on Russia or other commodity suppliers.

The European electricity market is probably the most intervened in the world. More intervention is not going to solve the problems created by a political design that has made most countries’ energy mix expensive, volatile, and intermittent.

Ideology is a bad partner in energy.

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