Europe emerges with a more secure energy supply and a stronger green sensibility

The geopolitical situation of 2022 made energy security the EU’s top priority. Two winters later, the difficulties in supplying oil and gas and the subsequent disruptions in service have been overcome through savings in consumption, electricity subsidies, increased inventories, guarantees to prevent company bankruptcies, and a wide range of subsidies for renewable energies, where hydrogen and biofuels have played a relevant role due to their strategic value. Europe has overcome the challenge with more energy independence, more resources and investments, and a greener sensibility to accelerate the measures of the Fit for 55 legislative package to move towards net zero CO2 emissions.

By Ignacio J. Domingo  

Energy remains a geostrategic risk of the highest priority for Europe in a period of sudden changes in the world order, marked by armed conflicts and difficulties in the continent's energy supply. 

Collateral damages still persist, such as persistent, stubborn inflation the likes of which we haven’t seen in four decades, or the highest interest rates since the beginnings of the euro to curb the spiral of prices. But the European strategy of subsidizing energy for companies and households while filling their gas stocks and protecting companies from the threat of bankruptcy with state resources and guarantees has had the desired effect. 

The strategy:ensuring security of supply and consolidating the pace of the energy transition

In 2024, the equation has simpler unknowns to solve. Now it is about turning the short-term emergency plans implemented at the time into a long-term strategy that will ensure a secure supply and solidify the pace of the energy transition. Since 2020, the European Green Deal has redoubled its efforts with investments from the Next Generation funds and the Fit for 55 measures to reduce CO2 emissions by 55% by 2030. This is the most demanding intermediate goal on the planet so that energy neutrality can become a reality on the Old Continent by 2050. To achieve this goal, the cost of carbon emissions is rising and national legal systems are quickly adapting to European rules.

Recently, we have seen the practical effects of the European Green Deal come to life. Spain, for example, had a full day powered exclusively by wind and solar energy and European utilities are rapidly pivoting their businesses towards sustainable energy. Moreover, the cost of clean energy is falling and the automotive industry is preparing to exclusively sell electric vehicles by the middle of the next decade. 

In addition, investment in the solar business has been reactivated. This was the other great lever with which the internal market ensured its energy needs and guaranteed its supplies. SolarPower Europe reports that almost 32 Gigawatts of solar capacity were installed in 2022, a 33% increase compared to the previous year, and it was the first year in which solar and wind power surpassed the combined electricity generation of gas, coal, and nuclear energy. 

In parallel, solar and wind farms have proliferated, making the supply more secure and correcting productive disruptions in 2024, a crucial exercise due to the increased competitive pace that policies to support green industries in the US and China have instilled in the market.

Adam Tooze, director of the European Institute at Columbia University, states that as a result, “European governments, companies, and societies are accelerating energy transitions, addressing three prongs of risk: supply, dependence on other sources, and high geopolitical and ecological uncertainty.” In his opinion, the EU “has set the cruising speed” on their green roadmap. 

Tomas Marzec-Manser, an analyst at the market research firm ICIS, believes that the European energy crisis has been overcome thanks to the authorities’ and economic operators’ solid management, and he highlights the strength of the internal market.   

ICIS argues that Europe “has created a safety cycle in the supply for the next decade.”

In this context, the EU Innovation Fund, worth 40 billion euros, aims to accelerate decarbonization through 2050. In this fund, hydrogen “gains ground” as an essential renewable source to “ensure supply guarantees and catapult sustainable technologies in the energy sector to eliminate carbon footprints,” says Marcus Ferdinand of the Norwegian consulting firm Veyt. Hydrogen, he says, “will be the instrument that will enable the EU to achieve its objectives by the end of this decade.”   

Moreover, the Commission decided to further strengthen the safety shield with its Hydrogen Strategy and Energy System Integration model (ESI), which identifies hydrogen and “other synthetic fuels” as essential factors for achieving full decarbonization. Both initiatives expressly recommend community partners to enhance capital needs, technological innovation, and to promote measures that contribute to safeguarding the value chains of these renewable energy sources in the future. Additionally, through the REPowerEU plan—which provided an urgent response to the Russian invasion of Ukraine—Europe has made considerable progress in the goal of turning clean hydrogen molecules and biofuels into essential driving forces of green industry, thereby strengthening European energy security.  

The commitment to green hydrogen

Europe and the United States have made a firm commitment to green hydrogen, with subsidies that, by the middle of 2023, amounted to 280 billion dollars according to BNEF, Bloomberg's energy analysis division, an increase of 43% compared to the end of 2022. 

More specifically, Washington has outlined investment portfolios of 7 billion dollars for hydrogen hubs throughout its territory, in order to increase its production and meet the growing demand from its industries. Europe, meanwhile, has set the challenge of generating 10 million tons of green hydrogen by 2030 and importing an equal amount. China is supporting hydrogen initiatives with up to 41 million dollars of state funding. 

According to the International Energy Agency (IEA), by 2050 hydrogen should account for between 15% and 20% of the global mix and drive sustainability in productive segments such as transportation or metallurgical industries. 

In 2023, CEPSA positioned this renewable source as one of the pillars of its corporate Positive Motion strategy, with the inauguration of the Andalusian Green Hydrogen Valley. This project is the most ambitious in Spain and Europe, as it includes the launch of the first continental maritime corridor, which will connect the ports of Algeciras and Rotterdam from north to south and will cut up to 6 million tons of CO2 per year. 

Ignacio J. Domingo has spent most of his 30 years of professional practice analyzing geopolitical, international economic and capital market issues in Expansión and collaborating with media channels such as El Confidencial, Capital, Estrategias de Inversión and El Diario.es, among others. He received the award as a first runner-up for the Citigroup Award, which recognizes the best annual economic reporting.