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1. The end of the energy price crisis must not mean the end of the energy transition

Author:
Valérie Plagnol
Publication Date:
04-2025
Content Type:
Working Paper
Institution:
Robert Schuman Foundation (RSF)
Abstract:
In many respects, Europe has recently experienced a rude awakening, albeit a salutary one. Barely recovered from the Covid pandemic, it has had to contend with the most serious energy supply crisis since the oil shocks of the 1970s, due to Russia's invasion of Ukraine and the subsequent disruption of Russian gas supplies, particularly via the Nord Stream pipelines. After electricity prices rose to extreme levels, their recent decline in Europe is particularly welcome. But this respite is far from enough. On the one hand, electricity prices are still higher than before the crisis and, on the other hand, they remain almost twice as high as those of our main trading partners, weighing on household purchasing power and business competitiveness. Such constraints, combined with rising geostrategic and trade tensions and the need to strengthen our common defence, have led some segments of European public opinion, including some economic actors, to question the efforts undertaken in the energy and climate transition. However, there can be no question of abandoning the path of energy transition, as the current tensions confirm the necessity and legitimacy of this approach. - This is, of course, about our climate future: numerous and consistent studies show that doing nothing rather than taking action will cost our economies and ourselves much more. - Geopolitical and economic tensions are accentuating the convergence between these imperatives and the need to strengthen our sovereignty, through diversification of supply sources and greater control of production cycles on our own soil. - The growing electrification of uses is generating a new industrial revolution – particularly in the mobility and artificial intelligence sectors – creating an economic and ecological dynamic that Europe is in a position to capture. Combining these imperatives therefore means accelerating the transition to energy and decarbonising our consumption. The current crisis has shown us that massive reliance on natural gas cannot be as stable a transition solution as we had hoped. Rising electricity prices have led to an acceleration of renewable energy projects and installations. More Member States support the development of nuclear power, better integrated into the overall mix and included in the European taxonomy. France, which is committed to renewing its facilities, is at the forefront of these efforts. Finally, strengthening and reorganising our electricity networks, including the development of interconnections, is already at the heart of our industrial strategies.
Topic:
Electricity, COVID-19, Energy Crisis, Russia-Ukraine War, and Energy Transition
Political Geography:
Europe

2. Unlocking India’s Energy Transition: Opportunities, Challenges, and the Role of Cross-Subsidies

Author:
Fatima Mumtaz
Publication Date:
04-2025
Content Type:
Journal Article
Journal:
Journal of Public and International Affairs (JPIA)
Institution:
School of Public and International Affairs (SPIA), Princeton University
Abstract:
This paper examines India’s opportunities and challenges in unlocking its clean energy transition. While the country has made significant advancements in expanding its renewable energy capacity, structural inefficiencies within the electricity sector continue to hinder progress. A key barrier is the cross-subsidy pricing mechanism, which charges commercial and industrial users higher electricity tariffs to subsidize power for agricultural and residential consumers. Although originally intended to promote equity, this mechanism has, over time, contributed to mounting debts for power distribution companies, ultimately weakening the financial health of the electricity grid. This paper provides an analysis of the consequences of the cross-subsidy electricity pricing mechanism. It further explores how a phased approach to reforming this pricing structure could offer a viable pathway to address the financial instability of the power distribution companies.
Topic:
Climate Change, Electricity, Renewable Energy, and Energy Transition
Political Geography:
South Asia and India

3. Vulnerabilities and Resilience of Electrical Grids in Wartime: Lessons from Ukraine

Author:
Volodymyr Kudrytskyi and Mariana Budjeryn
Publication Date:
03-2025
Content Type:
Video
Institution:
MIT Center for International Studies
Abstract:
Vulnerabilities and Resilience of Electrical Grids in Wartime: Lessons from Ukraine: Tuesday, March 11, 2025. The Russian assault on Ukraine’s electrical generating capacity and transmission grid as part of its full-scale war against Ukraine, is unprecedented in the history of warfare. Volodymyr Kudrytskyi, the former CEO of Ukraine’s electric grid operator Ukrenergo, discussed the challenges of securing Ukraine’s energy system throughout the war, lessons for mitigating grid vulnerabilities, and prospects for rebuilding a more resilient energy system in Ukraine and Europe. Speaker: Volodymyr Kudrytskyi served as the CEO and Chairman of the Management Board of the Ukrainian Transmission System Operator Ukrenergo from February 2020 until September 2024. Under his leadership, Ukraine’s electrical grid has undergone preparations for synchronization with the power system of Continental Europe ENTSO-E and emergency synchronization with ENTSO-E in response to Russia’s full-scale invasion of Ukraine. From February 24, 2022, Mr. Kudrytskyi and his team at Ukrenergo managed the Ukrainian power grid through unprecedented Russian attacks against Ukraine’s critical infrastructure. Previously, Mr. Kudrytskyi held leadership roles in key Ukrainian energy sector companies, including Naftogaz and Ukrtransnafta. Mr. Kudrytskyi holds a degree in international finance from Kyiv National Economic University. Moderator: Mariana Budjeryn is the author of Inheriting the Bomb: The Collapse of the USSR and the Nuclear Disarmament of Ukraine (Johns Hopkins University Press, 2023) and a winner of the 2024 William E. Colby Military Writers’ Award, the first female in the award’s 25-year history. Dr. Budjeryn is a member of the Committee on International Security and Arms Control of the National Academies of Sciences and a senior nonresident fellow at the Brookings Institution.
Topic:
Electricity, Resilience, Vulnerability, and Russia-Ukraine War
Political Geography:
Russia, Europe, and Ukraine

4. Upgrading Europe's electricity grid is about more than just money

Author:
Conall Heussaff and Georg Zachmann
Publication Date:
02-2025
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
Electricity network investment is essential for the energy transition, with annual investments of tens of billions of euros required across Europe. Network companies are already investing such amounts and delivering efficient grid investments requires more than additional money. Assessing infrastructure needs is the first step in grid investment. At local, national and European Union levels, network development planning is determined by policy choices and can greatly affect the efficiency of investments. Coordinated grid planning is crucial to set the right incentives for the efficient development of the European electricity system. An EU independent system operator could assume responsibility for network planning by providing regular, independent assessment of efficient network investment needs from a holistic European perspective. Although significant capital expenditure is undoubtedly necessary, network regulation should encourage network companies to invest in the most-efficient solutions. Current regulatory approaches may favour traditional capital expenditure, leading to system inefficiencies and higher-than-necessary consumer costs. Cross-border electricity transmission infrastructure is critical to integrate renewables into the electricity system at scale and reduce costs for European consumers. But such projects are often not built or are delayed because those that decide on and pay for the infrastructure are not necessarily those that benefit from it. A European fund could smooth negotiations between parties and accelerate the physical interconnection of the European electricity system. Fairly recovering the costs of grid investments from consumers is vital to maintain public support for the energy transition. National funds could smooth out cost impacts over time, keeping electricity affordable throughout the energy transition.
Topic:
Climate Change, Electricity, Decarbonization, and Energy Security
Political Geography:
Europe

5. Who should be charged? Principles for fair allocation of electricity system costs

Author:
Conall Heussaff, Eva Jüngling, Simone Tagliapietra, and Georg Zachmann
Publication Date:
04-2025
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
The high costs in the European Union of supplying electricity can only be structurally reduced through decarbonisation and deeper European electricity system integration. In the short-term, policymakers have few choices. They can redistribute system costs by shifting components from one consumer to another. Another immediate distributional option would be to reduce energy taxation, implicitly shifting costs to the taxpayer. Meanwhile, decision-making processes that translates electricity system costs into final consumer prices are fragmented. Rules on the short-term production, transmission and consumption of electricity are determined at EU level. National regulators and governments determine how the fixed costs of the system are recovered from consumers, while national policymakers also set energy taxes. This Policy Brief sets out options for shifting the fixed costs of the electricity system between consumers, for changing energy taxation to reduce prices and for evaluating systemic trade-offs between system cost and other characteristics, such as sustainability and reliability. We also estimate the quantitative effects of shifting costs between consumers and reducing taxes on electricity. We set out four principles for pricing electricity fairly. Policy interventions in the electricity system should not seek to achieve broader economic objectives at the expense of energy-policy goals. Consumer prices should incentivise efficient system operation. Carbon emissions should be priced in. The fixed costs of the electricity system should be primarily recovered from inelastic consumption. European policymakers should develop transparent analytical tools to assess the distributional effects of electricity-policy interventions. Lessons should be learned from the energy crisis, during which EU and national policies attempted to shield consumers from price impacts, and these lessons should form the basis of ongoing efforts to reduce prices. EU guidelines for electricity cost recovery should be established, following fundamental economic principles, and could form a policy toolbox for national governments to reduce energy prices. Finally, the long-term strategic goal of deeper physical and institutional integration of the European electricity should be pursued to structurally reduce electricity prices.
Topic:
Climate Change, European Union, Electricity, and Energy
Political Geography:
Europe

6. Energy poverty on the flip side of energy subsidies

Author:
Julian Puig and Leonardo Gasparini
Publication Date:
04-2025
Content Type:
Working Paper
Institution:
Center for Distributive, Labor and Social Studies (CEDLAS)
Abstract:
This paper examines the relationship between energy subsidies and energy poverty (EP). Understanding this relationship is important because subsidies are often justified from an equity perspective to protect the most vulnerable households. Argentina, which has subsidized residential energy consumption since the early 2000s, is used as the case study. Since then, the energy subsidy policy has experienced two well-defined phases: massive and universal subsidies until 2015, followed by an attempt at reduction and targeting. This context, combined with notable regional disparities -including variations in income levels, climatic conditions, energy prices, and residential energy consumption patterns (e.g., electricity vs. piped gas)- makes this case study particularly compelling. EP is analyzed both unidimensionally and multidimensionally. Under both measures, EP follows a U-shaped pattern that reflects the phases of energy subsidies: a significant decrease between 2005 and 2013, followed by a considerable increase by 2018. The paper also highlights the key role of regional disparities which is crucial for interpreting the results beyond the Argentine case. Based on the findings, the paper contributes with globally relevant insights on the link between energy subsidy policies and EP.
Topic:
Poverty, Gas, Electricity, Subsidies, and Energy
Political Geography:
Argentina and South America

7. The Prospects of Indonesia’s Nickel Boom Amidst a Systemic Challenge from Coal

Author:
Thibault Michel
Publication Date:
05-2024
Content Type:
Working Paper
Institution:
Institut français des relations internationales (IFRI)
Abstract:
Indonesia is a country that is booming economically and demographically. This not only matters for regional political and energy security, but also increasingly, for the world’s energy transitions, due to Indonesia’s large metal reserves, as well as its equally important coal consumption in industry and for power generation. Over the last 20 years, Indonesia’s economy has been characterized by very dynamic growth, massive increases in its electricity demand, and coal consumption and exports. Hence, its greenhouse gas (GHG) emissions are on a steady growth trajectory, although the country has committed to lowering them by 32% (unconditional) or 41% (conditional) by 2030. With its Organisation for Economic Cooperation and Development (OECD) membership application, occurring in the context of global energy transition requirements and geopolitical confrontations, Indonesia is today at a crossroads. Indonesia has 42% of the world’s nickel reserves, as well as substantial reserves of copper, gold, tin, and, notably, coal. This wealth in natural resources has given the mining industry crucial importance in Indonesia’s economic growth and has recently taken an even more prominent place: Indonesia has managed to become the world’s largest nickel producer within just a few years, as its share in global nickel extraction grew from 5% in 2015 to 50% in 2023. The country is also the world’s third copper ore exporter. Coal and energy transition minerals have progressively replaced oil and gas in Indonesian exports. Between 2011 and 2023, oil and gas exports fell by nearly two-thirds and their share in the national exports decreased from 20% to 6%. In 2023, export revenues from copper were larger than those of oil and equal to gas earnings. Yet, having major mineral deposits and mining activities is no longer considered sufficient by the Indonesian government. So far, the mineral industry’s growth has relied hugely on Chinese investments and on low-added-value activities, especially in pyrometallurgy processing. Diversification of trade partners and expansion into new, entire value chains is, therefore, a key objective for the Indonesian government. Indonesia is seeking to boost trade with the United States (US), the European Union (EU) and even the Eurasian Economic Union. However, negotiations over respective agreements are currently encountering hurdles due to American legislation (the Inflation Reduction Act and Foreign Entities of Concern status), which could seriously threaten Indonesian exports of battery mineral components to the US market while they also face hurdles to entering the EU due to environmental regulations. The second part of Indonesia’s strategy focuses on the development of new industrial segments of value chains: refining facilities, hydrometallurgical processing plants, battery factories, etc. To develop these activities, the Indonesian government is using two main tools: the divestment of foreign companies in local firms and export bans on crude ore exports. Such bans have been introduced for nickel in 2020 and for bauxite in 2023, while they are expected for copper in 2024 and perhaps even later for tin. Indonesia is today also confronted with the negative repercussions of mining activities on its soil, including protests over the lack of safety in its mines and smelters, citizens’ expropriations, the presence of indigenous tribes on mining sites, and, above all, damage to the environment. Such damage also has its roots in the substantial amounts of energy used to feed smelters, which mostly rely on the use of coal. Decarbonizing Indonesia’s economy has thus become a central challenge for the country, where the consequences of climate change are already palpable on the archipelago’s soil, with extreme weather events and the sinking of the capital city – Jakarta – as sea levels rise. To carry out the tremendous transformation towards net-zero emissions while ensuring steady and sustainable development, the country has signed a Just Energy Transition Partnership and prepared decarbonization scenarios within this framework. Key priorities in the coming years include renewable energy deployment, grid development and an early phase-out of coal. Deploying renewable energy sources as well as large and resilient grids is made more difficult by the country’s geography. The archipelago includes 17,000 islands, some of them being undeveloped, hard to access and far away from each other. Furthermore, the levelized costs of solar and wind power are currently high in Indonesia compared with other developing countries, while public subsidies for coal do not favor low carbon generation sources. If the two first points are thus very challenging, the last one appears to be the hardest, considering the Indonesian economy’s tremendous dependency on coal. Concerns are therefore rising about Indonesia’s ability and even willingness to pursue a genuine, albeit differentiated decarbonization pathway. There are also many questions regarding Indonesia’s mineral trade strategy. New bans on crude ore exports are expected to come into force, while new mining and mineral processing operations are under development across the archipelago, as quantities of nickel produced in the country are at historic highs. This extraordinary increase in nickel production, concomitant with a global economic slowdown, has resulted in a sharp fall in nickel prices, with nickel losing half of its value between January 2023 and February 2024. As a result, many producers are finding themselves in danger, especially in Australia or New Caledonia. While there could be a deliberate strategy to flood the markets and neutralize competition, notably by Chinese companies that control 75% of the global nickel supply (mainly from Indonesia but also from the Philippines), the country faces serious dilemmas. Indonesia’s oil and gas production is diminishing, and it increasingly relies on nickel exports and higher nickel prices for its economic stability, with coal also remaining very important. Indonesia’s resource nationalism and industrial strategy, which include attracting foreign investments, notably via its OECD membership pledge, require a credible pathway to reduce the carbon footprint of its electricity generation. Among the pathways towards both decarbonization and the development of industrial battery value chains, three steps could be considered: Deploying renewable energy sources, especially solar photovoltaic (PV) power and offshore wind farms, as well as progressively transferring subsidies from coal to renewable energy sources. Developing a clean battery industry based on high environmental, social and governance (ESG) criteria and on the wealth of Indonesia’s subsoil, which includes most of the metals used in battery manufacturing. Protecting climate and biodiversity by favoring innovative solutions for mining waste management and upholding high ESG standards.
Topic:
Natural Resources, Electricity, Coal, Lithium, Minerals, Energy Transition, and Nickel
Political Geography:
Indonesia, Southeast Asia, and Indo-Pacific

8. Watts happening to work? The labour market effects of South Africa’s electricity crisis

Author:
Haroon Bhorat and Timothy Köhler
Publication Date:
04-2024
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Frequent electricity outages threaten to impede the benefits of expanded access achieved by many developing countries in recent decades. A large literature documents these negative effects, however almost none consider labour market effects. This paper merges labour force survey microdata with high-frequency electricity supply and demand data to provide the first estimates of the relationships between outages and labour market outcomes in South Africa, a country characterized by frequent, severe outages referred to as load shedding. Exploiting temporal variation in outage incidence and intensity, we find that load shedding is associated with significantly lower employment rates, working hours, and earnings on average. Employment appears more sensitive relative to intensive margin outcomes, threatening job creation and preservation efforts. These negative relationships, however, are not evident for low levels of load shedding, but their strength markedly increases with load shedding intensity. We document further heterogeneity by firm size and industry, highlighting the vulnerability of jobs in manufacturing. Overall, our findings suggest that the South African labour market is largely insensitive to relatively low levels of load shedding; however, high levels appear especially costly.
Topic:
Employment, Economy, Electricity, and Labor Market
Political Geography:
Africa and South Africa

9. The changing dynamics of European electricity markets and the supply-demand mismatch risk

Author:
Conall Heussaff and Georg Zachmann
Publication Date:
07-2024
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
Meeting Europe’s 2030 climate targets will require massive clean-electricity investment. To facilitate these investments, state-backed de-risking schemes such as contracts for difference (CfDs) are needed. Their role in supporting renewables has been consolidated by the European Union’s recently agreed electricity market design reform. Under such state-backed schemes, the distribution of costs between the market and the state will depend on the balance of supply and demand. Lower demand will decrease spot-market prices, reducing market costs but increasing the cost to CfD-issuing states. If electrification of European energy demand does not keep pace with the electricity supply expansion, tens of billions of euros annually could be channelled through state contracts, generating costs that must ultimately be recovered from consumers. A cost-efficient, managed transition will require European coordination of electricity supply, demand and network investments. Clean electricity supply and demand should be synchronised through a combination of state interventions and market mechanisms. Undersupply of clean power will mean a failure to meet climate targets, but oversupply can be costly too. To manage the costs of renewable de-risking schemes and to accelerate energy-system decarbonisation, flexible electricity systems should be promoted, policies to encourage electrification could be implemented and cost-recovery arising from state-backed renewable support schemes should be fair.
Topic:
Climate Change, Markets, Electricity, Energy, and Supply and Demand
Political Geography:
Europe

10. Unity in power, power in unity: why the EU needs more integrated electricity markets

Author:
Georg Zachmann, Carlos Batlle, Francois Beaude, and Christoph Maurer
Publication Date:
02-2024
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
The energy crisis that started in 2022 reminded European governments of the resilience provided by relatively well-integrated European electricity markets, which have been painstakingly built-up over several decades. European Union leaders thus decided to reverse a creeping energy renationalisation and to invest in completing the internal market. However, there are some indications that this momentum is being lost, with different EU capitals taking different lessons from the energy crisis, at a time of unprecedented investment needs in generation and grids across the EU. The multiple benefits of enhanced EU energy-market integration should be emphasised. ‘Techno-economic’ benefits can be secured from optimising the design and operation of several national electricity systems jointly, rather than individually. These benefits will increase massively with higher shares of renewables and include less fossil-fuel burn and less volatile short-term prices, cost savings through harnessing regional renewables advantages, reduced need for expensive back-up capacity and flexibility, and enhanced resilience to shocks. In addition, greater energy-market integration will trigger benefits of a more managerial-governance related nature, though these are harder to quantify. They include benefits in terms of competition, innovation and credibility, which are particularly useful in the electricity sector, which typically faces rather long investment times and high degrees of concentration in purely national markets. Further market integration requires substantial political investment. Governments will need to deal with significant distributional effects within and between countries. Experience has shown that domestic political constraints in this respect are often numerous and difficult to overcome. Therefore, achieving the benefits of integration will require a vision on what degree of integration is feasible and desirable, and how to properly implement and govern it. It will also require an honest acknowledgement of the implications and costs of not pursuing greater integration.
Topic:
Markets, European Union, Regional Integration, Electricity, and Energy Crisis
Political Geography:
Europe