Nord Stream 2 benefits consumers, climate and economy
Nord Stream 2 benefits consumers, the climate and the economy, writes Alex Barnes.
Alex Barnes | Photo credit: Nord Stream 2
The aims of energy union are both sensible and well known: secure, affordable, climate-friendly ‘sustainable’ energy and supporting investment. Nord Stream 2 meets these objectives. The EU has a competitive energy market where gas suppliers not only compete among themselves but also with other energy sources such as coal or renewables.
Analysis by both the European Commission and the Agency for Cooperation of Energy Regulators show how gas is priced at hubs and how gas suppliers, including Gazprom, have to be competitive with hub priced gas. EU rules also ensure that gas which arrives via Nord Stream 2 can flow where it is needed within the EU. No region can be isolated as a result of Nord Stream 2.
A dysfunctional pricing of emissions means that gas has lost market share to cheaper coal in power generation; only 16 per cent of electricity today is generated by gas compared to 25 per cent by coal which emits double the CO2. This illustrates the falsity of “technology lock in” or increased “dependence” due to infrastructure. In a competitive market it is price which determines how much gas is bought and from whom.
The mothballing of modern gas fi red power stations demonstrates that building infrastructure does not guarantee its use. Nord Stream 2 enables consumers more choice between competitive pipeline gas and more expensive LNG.
US LNG is likely to be 25-45 per cent more expensive than European market prices on a full cost basis. Market experts agree that LNG prices will be set by other regions and that Europe will essentially pick up what is left.
After the Fukushima nuclear crisis, Asian LNG prices were over 60 per cent higher than European prices, so LNG went there instead of Europe.
A new study by ewi Research & Scenarios shows that the availability of Nord Stream 2 could reduce expensive LNG imports and free up to €35bn a year to be spent on investment and growth instead.
Furthermore, according to a recent report by Arthur D. Little, Nord Stream 2 is creating 31,000 jobs and boosting GDP by €2.25bn as a result of investment in 15 countries across the EU.
Reducing CO2 emissions now gives Europe more time to build the low carbon economy.
Replacing coal with gas via Nord Stream 2 would immediately reduce CO2 emissions in power generation by 160 million tons per year, equivalent to the total annual emissions of Sweden, Finland, Estonia and Lithuania combined.
And finally Nord Stream 2 provides security of supply as a separate system connecting Europe to new large fields in Yamal via a route that is one third shorter and more efficient than current routes. It cannot prevent Europe developing other import routes for gas as the many other LNG and pipeline projects show. At the end of the day it is European consumers who decide from whom to buy their gas.
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