Energy Crisis: What is Next in Europe?

Energy Business Review | Friday, February 10, 2023

Since the summer of 2021, energy prices have seen unprecedented spikes and volatility across Europe. Global energy market disruption caused by Russia's invasion of Ukraine has put a strain on EU households and the economy.

The European Commission recommended an emergency intervention in Europe's energy markets to address recent price increases to reduce total energy demand across the EU.

Stay ahead of the industry with exclusive feature stories on the top companies, expert insights and the latest news delivered straight to your inbox. Subscribe today.

This includes exceptional electrical demand reduction policies, which can lower consumer electricity rates, as well as policies that redistribute excess profits from the energy business to end users. These actions are built on previously approved ones that involved increasing gas storage and decreasing gas use as part of the EU's "Save gas for a safe winter" initiative to get ready for supply interruptions throughout the winter. The relatively mild winter from 2022 to 2023 has unexpectedly helped the first objective. Since it has been a very cold year, the energy demand has been lower than expected.

Europe's consumers have seen cost reductions thanks to price controls, windfall taxes, and giveaways. All member states have implemented national budgetary policy measures to lessen the impact of energy price increases on consumers and businesses, according to the European Commission's Toolbox on Energy Prices, which was released in October 2022. Throughout the energy crisis since September 2021, 705.5 billion Euros has been granted and set aside across European countries to help shield consumers from rising energy costs. These policies aid in supporting household income, compensating businesses engaged in energy-intensive activities, and taxing energy companies' windfall gains. The Commission urged member states to make these interventions short and focused on the most disadvantaged to prevent market distortions.

Since the beginning of the energy crisis, proposals for new LNG shipping terminals and gas pipelines, as well as attempts to advance renewable energy projects and improve energy efficiency, have exploded in Europe. The European Commission is pushing for higher energy efficiency and to speed up the adoption of renewable energy sources to hasten the transition to clean energy. This will lessen Europe's reliance on fossil fuels and its vulnerability to unpredictable energy markets. The Commission unveiled the REPowerEU Plan in May as their solution to swiftly reduce the EU's reliance on Russian fossil resources. The European Parliament and Council came to a political agreement on REPowerEU on December 14, 2022. This is particularly crucial since the EU still needs to achieve its long-term carbon neutrality promise by 2050.

By further reducing electricity demand, implementing a cap on market revenue for less expensive energy sources like renewables, and launching a solidarity contribution from the fossil industry, the Emergency Intervention to Address High Energy Prices seeks to mitigate the current price increases for electricity and gas. The capital collected through these actions will be utilised to lower energy rates for both consumers and business entities. Concerns about the gas market are addressed by the regulations on increased solidarity for gas purchases, quicker deployment of renewable energy sources, and the market correction mechanism, all of which were implemented on December 19, 2022. This package includes a price restriction on wholesale gas trading inside the EU, new complementary LNG benchmarks, an intraday volatility management system, default solidarity rules between EU members, and collaborative purchasing mechanisms. The rules significantly simplified the renewable energy permitting process.

The European Scientific Advisory Board on Climate Change assessed how different types of policy responses to the energy crisis can affect the move towards climate neutrality and formulated several recommendations about how to address both the energy and climate crisis simultaneously.

Policymakers should concentrate on addressing the crisis's core cause. Energy supply and demand were out of balance, which led to rising prices and the energy crisis. To lower prices, it is, therefore, necessary to decrease energy demand while increasing the supply of safe, domestic, low-carbon energy. Further energy demand reductions should be pursued by the EU and its member states through both technical (energy efficiency, particularly through faster building stock renovations) and non-technical (behavioural changes) techniques.

Renewable energy deployment and investment rates require both to at least double. To do this, the EU and its Member States should make sure that the investment environment is secure, streamline the approval process, and improve the energy grid's flexibility and storage capabilities. To increase efficiency and cut back on the use of fossil fuels, national and EU policies should promote the electrification of energy end-use sectors. To achieve this, price signals should be in line with climate goals. For example, carbon emissions from all fossil fuels should be priced, and the tax burden on fossil fuels should be transferred from electricity. The advisory board appreciates the interim agreement on the EU ETS Directive change in this context and anticipates a bold conclusion to the current Energy Taxation Directive revision. To facilitate electrification in end-use industries, the EU's power market reform should also strive to encourage investments in renewables while enabling markets to benefit from affordable electricity.

The European Commission started a public consultation on the structural reform of the electricity market in the European Union last month. The Commission states that consumers are bearing the financial burden of the current crisis of high and fluctuating electricity prices, and as a result, reform is required to better protect them from such volatility and to support access to reliable energy from clean sources while strengthening the market.

More in News

The energy sector is poised for a transformative year, with several emerging trends poised to redefine how we produce, distribute, and consume energy. These trends, driven by technological advancements, environmental concerns, and shifting consumer preferences, promise to shape the sector's landscape, presenting challenges and opportunities. Renewable energy sources like solar and wind are gaining unprecedented momentum. As technology improves and costs plummet, renewables become more accessible and economically viable, even outpacing traditional fossil fuels in some regions. This shift marks a significant step towards reducing global carbon emissions and diversifying the energy supply, enhancing energy security. Energy storage technology is another area witnessing rapid advancements. Their intermittent nature has always hampered the integration of renewable energy sources into the national grid. However, improvements in battery technology, such as lithium-ion batteries and other innovative storage solutions, are making it possible to store surplus energy generated during peak production times for use during demand spikes. This capability stabilizes the grid and ensures a steady energy supply, regardless of weather conditions. The digitalization of the energy sector is transforming the industry from the inside out. Smart grids, which utilize IoT technology, enable a more efficient and reliable electricity distribution. Smart grids predict and respond to energy demand, reducing waste and saving costs. Additionally, blockchain technology is beginning to play a role in energy trading, allowing for more transparent and efficient transactions. Electrification of transport is another significant trend, with electric vehicles (EVs) becoming increasingly popular. This surge in EV adoption is driven by advancements in battery technology, making EVs more affordable and practical for everyday use. The rise of EVs is expected to lead to a substantial increase in electricity demand, pushing further developments in renewable energy and grid management. The concept of energy efficiency continues to gain traction. Technological advancements and increased awareness are leading households and businesses to invest in energy-efficient appliances, LED lighting, and smart home systems.  ...Read more
The global energy sector is changing. Countries are expanding their renewable energy capacity, upgrading their power infrastructure, diversifying their energy sources and improving energy security. Energy companies are facing a growing range of risks from natural disasters, construction delays, operational disruptions, cyber-attacks, supply chain disruptions, commodity price fluctuation and regulatory requirements changes. The different and interconnected exposures are often not sufficiently covered by existing insurance programs, which lack the necessary flexibility. Alternative risk transfer solutions offer flexible tools to manage high-value or specialized risks faced by organizations, in addition to traditional insurance. Such solutions may include captive insurance arrangements, parametric risk solutions, structured risk financing, multi-year coverage programs, and capital market-based risk transfer models. Across APAC, energy producers, utilities, renewable energy developers, oil and gas companies, transmission operators and infrastructure investors are increasingly looking at these solutions to bolster financial resilience and facilitate long-term investment and business continuity. Emerging Technologies and Growth Drivers Several factors are pushing the energy sector in APAC towards alternative risk transfer solutions. The main growth driver is the rapid development of renewable energy projects in the area, including solar, wind, hydropower, geothermal and energy storage facilities. These projects introduce new operational and financial risks, often necessitating custom risk financing approaches outside traditional insurance products. Natural hazards like typhoons, floods, earthquakes, and wildfires can have a consequential effect on energy infrastructure in many countries in the APAC region. Organizations increasingly are looking for alternative risk transfer structures that offer quicker and more predictable financial recovery from catastrophic events. AI is analyzing operational data, weather patterns, equipment performance and historical loss data to improve risk assessment, which is improving risk modeling and helping to enable more precise pricing of alternative risk solutions. With AI-driven analytics, organizations can gain a better understanding of complex exposure profiles and improve their risk financing strategies. Advanced data analytics and predictive models are enhancing scenario planning to evaluate the impact of operational disruptions, infrastructure failures and market volatility on the bottom line. These insights help organizations build better and more resilient risk-transfer programs. Cloud-based risk management platforms assist in managing insurance programs, captive structures, claims data and operational risks in a centralized manner across geographically sprawled out energy assets. It helps energy companies, insurers, brokers and risk advisors work better together. Industry Trends and Applications Reshaping the APAC Market The solutions offer pre-agreed financial payouts when measurable environmental parameters are triggered, allowing for faster access to capital when qualifying events occur. A further significant trend is the embedding of environmental, social and governance (ESG) factors in risk financing decisions. Energy companies are increasingly combining alternative risk transfer strategies with sustainability goals, climate resilience planning and long-term investment strategies. Cyber risk financing continues to grow as energy infrastructure becomes more digital and connected. Companies are demanding customized risk transfer solutions for operational technology risk, cyber incidents and business interruption related to digital infrastructure. Alternative energy risk transfer solutions are evolving from niche financial instruments to integrated enterprise risk management strategies. A major trend in APAC is the growing use of insurance structures that enable large energy companies to retain selected risks and better manage insurance costs and claims administration over the long term. Parametric risk solutions are gaining momentum, particularly in the renewable energy and infrastructure sectors that are exposed to weather events. Alternative risk transfer solutions provide support for applications spanning renewable energy generation, oil and gas operations, electricity transmission and distribution, liquefied natural gas infrastructure, energy storage facilities, offshore energy projects and industrial energy assets. That flexibility allows organizations to address risks specific to their sector while enabling long-term capital investment and operational resilience. Exploring the Future of Energy Alternative Risk Management Energy alternative risk transfer solutions are strengthening financial resilience by enabling organizations to manage complex and emerging risks more effectively than traditional insurance structures alone. Tailored risk financing better protects capital, improves business continuity planning, and strengthens investment confidence across major energy projects. As APAC continues to grow in renewable energy capacity, grid infrastructure upgrade and investments in energy transition initiatives, demand for alternative risk transfer solutions is expected to grow in the future. AI is likely to take on a bigger role in forecasting risk modeling, portfolio optimization and dynamic underwriting, enabling organizations to create more responsive and data-driven risk financing strategies. As the energy sector in APAC evolves through infrastructure expansion, renewable investment and digital transformation, alternative risk transfer solutions will continue to be vital in supporting resilience, investment stability and sustainable development. Organizations that employ innovative risk financing strategies will be better prepared to deal with uncertainty and drive long-term energy development in the region. Climate analytics and advanced catastrophe modeling are expected to enhance risk assessment by offering a better understanding of environmental exposures and infrastructure vulnerabilities. Enhanced integration of digital risk management platforms, asset monitoring systems and financial analytics will continue to improve enterprise-wide visibility into operational risks and insurance performance.   ...Read more
Commercial and industrial solar panel installations have rapidly gained prominence as an effective means to harness the sun’s abundant energy. Solar power has emerged as a beacon of hope in an era dominated by environmental concerns and the quest for sustainable energy solutions. The burgeoning trend is reshaping the energy landscape, offering many benefits across various sectors. The significant reduction in energy costs is the most compelling reason for businesses to invest in solar panel installations. With solar panels in place, commercial and industrial entities can generate a substantial portion of their electricity needs from the sun. Carbon emissions are significantly reduced when solar panels are installed in commercial and industrial settings. By harnessing clean and renewable solar energy, businesses are taking a decisive step towards a greener future. The transition aligns with corporate social responsibility goals and is a powerful statement of commitment to environmental stewardship. Solar panels provide businesses with a degree of energy independence, reducing their reliance on traditional energy sources and the volatility of energy markets. Solar installations coupled with energy storage systems can ensure a continuous power supply in regions prone to power outages, safeguarding critical operations and minimizing downtime. Governments worldwide recognize solar energy’s pivotal role in combating climate change. They offer a range of incentives and tax benefits to businesses investing in solar installations. The incentives can include tax credits, grants, and rebates, making solar projects more financially appealing and accelerating the return on investment. Commercial and industrial properties with solar panel installations often command higher market values. Studies have shown that solar-powered buildings have a higher resale value and tend to sell faster than their non-solar counterparts. The increase in property value can be a significant long-term benefit for businesses. The solar industry has emerged as a powerful engine for job creation. Local communities benefit from installing, maintaining, and operating solar panels. The growth of the solar sector fosters economic development, attracting investments and stimulating innovation. Commercial and industrial solar installations are highly scalable, accommodating businesses of various sizes and energy needs. Solar solutions can be tailored to meet specific requirements, whether a small enterprise or a large industrial complex. The scalability and flexibility in system design and installation options make solar an adaptable choice for various industries. Embracing solar energy is a powerful statement that resonates with customers, employees, and stakeholders. It aligns the business with the values of a growing, environmentallyconscious consumer base. Adopting commercial and industrial solar panel installations represents a strategic move towards a sustainable and cost-effective energy future. Beyond immediate financial benefits, businesses stand to gain increased environmental credibility, energy independence, and a competitive edge in a rapidly evolving market. ...Read more
Sustainable solar energy solutions remain a key component of the global energy transition. Through technological advancement, growing adoption and strong sustainability commitments, solar power is helping organizations reduce environmental impact, improve energy security and increase operational efficiency. As clean energy continues to rise, solar energy is expected to play an even greater role in supporting future sustainable development worldwide. Advancing Solar Technology Improving Energy System Performance Solar energy systems are still improving with the development of new technologies. New solar panels are increasingly more efficient, so that more solar electricity can be produced from the same installation area. With the improvement of PV technology, organizations can ensure maximum energy generation with lower future operating expenses. Excess electricity produced by solar panels in the daytime can be stored and consumed at night with advanced battery solutions. This ensures a more reliable supply of energy and helps to minimize reliance on conventional energy sources. Today, solar storage is becoming a vital part of solar infrastructure, offering flexibility and the ability to enhance energy security. Smart energy management systems enable extra benefits for solar users. A digital monitoring platform gives real-time insight into energy generation, system performance and electricity use. This data can be leveraged by businesses to optimize their energy use, improve energy efficiency, and maximize their ROI. Increased visibility enables optimized decision-making and fulfillment of sustainability objectives. Manufacturers are constantly working to make solar panels more durable and long-lasting to ensure they can withstand different environmental factors and conditions to function for many years. The sector has new opportunities emerging through research and development. New materials and cutting-edge manufacturing techniques are making production more efficient and cost-effective. Grid integration technologies are also developing to enable more effective integration of solar systems with current power grid infrastructure and increase the proportion of renewable energy in the power grid. These advancements are supporting solar deployment across multiple regions, including Latin America, where investments in renewable energy infrastructure continue to expand. Expanding Adoption Creating New Renewable Energy Opportunities Businesses are working to cut down on carbon emissions and integrate sustainability into their business practices. Solar power presents a viable option that promotes sustainability, enhances energy independence and energy resiliency. Companies and residential customers are searching for methods to lessen the impact of volatile energy prices and to take control of future energy costs. On-site electricity generation can reduce operating expenses and improve cost predictability. The price of installing solar energy keeps falling, and a wider group of users can avail themselves of it now. There are still government programs to facilitate market growth. Most areas offer grants, incentives, financing programs and renewable energy policies to incentivize investments in solar infrastructure. Government support remains particularly important in Latin America, where renewable energy initiatives are helping accelerate solar adoption across residential, commercial and industrial sectors. The actions contribute to the broader sustainability and clean energy goals and promote faster uptake. Corporate sustainability projects bring more solar opportunities. The use of renewable energy is a part of many environmental measures aimed at cutting emissions and promoting responsible business practices. Installing solar power has made a tangible difference in showcasing sustainability and enhancing operational efficiency. Solar energy is increasingly being used in industrial facilities for their daily activities. Renewable energy is being adopted in manufacturing facilities, logistics centers and commercial buildings to optimize electricity usage and minimize future energy costs. Solar systems can enhance the efficiency of operations and contribute to long-term sustainability objectives. Organizations are looking to make charging stations accessible for transportation electrification and keep the electricity provided clean energy. As organizations work to meet transportation electrification goals, solar-powered charging stations are becoming more prevalent. The synergies between generating renewable energy and electric mobility are opening up new business opportunities in the energy industry. Solar technology is also increasing access to energy in far-flung and unserved areas. Standalone solar systems can supply and provide uninterrupted power in areas where grid power is not available or is available but limited. These solutions enable economic development, enhance living conditions and increase access to energy. Sustainability Commitments Driving Long-Term Solar Investments Long-term sustainability goals continue to influence public and private energy investments. Governments, businesses and institutions are increasingly prioritizing renewable energy projects that support climate action, environmental protection and resource conservation. Across Latin America, sustainability commitments are encouraging greater investment in solar energy projects that contribute to long-term environmental and economic objectives. Many organizations are focused on reducing greenhouse gas emissions. Solar power generates electricity without direct emissions during operation, making it an effective solution for lowering environmental impact. Solar installations allow organizations to generate their own electricity and reduce reliance on external energy suppliers. Greater control over energy resources improves resilience against market volatility and supply disruptions while supporting long-term operational stability. Solar energy is increasingly incorporated into environmentally focused building designs for commercial properties, educational institutions and residential developments. Renewable energy integration supports sustainability certifications, improves building performance and enhances environmental credentials. ...Read more