EU energy security amid “seismic” global shifts

This week we explore the growing energy security challenges facing Europe amid a “seismic” shift in the global geopolitical order. In light of this, we discuss plans by the European Commission to support industry and keep energy affordable. Will these measures be enough to protect the continent from instability and price shocks? Kristian Ruby, secretary general of Eurelectric, weighs in on whether the bloc is moving fast enough to secure its energy future in an increasingly uncertain world, while pondering the role of flexibility in stabilising power markets and opines on how electric vehicles could be a game-changer for grid resilience. 

Host: Richard Sverrisson – Editor-in-Chief, Montel.
Guests: Kristian Ruby – Secretary General, Eurelectric; Fatima Sadouki, Energy Correspondent, Montel.

Podcast editor: Bled Maliqi, Montel. 

Transcript

Richard Sverrisson – Editor-in-Chief, Montel News: 0:01

Hello listeners and welcome to Plugged In - the energy news podcast from Montel. Each week we bring you in-depth analysis and insights from across the energy sector. This week we focus on Europe's energy security and the crucial role of flexibility, ensuring a resilient power system with cyber threats on the rise and geopolitical uncertainty looming large. How prepared is Europe to keep the lights on? The European Commission has recently announced its clean and. Industrial deal, an affordable energy action plan. Will these measures be enough to shield the continent from external pressures and internal political shifts and the rise of populism? And as electric vehicles become more widespread, could they be key to unlocking greater grid flexibility, lowering costs for consumers, and enhancing Europe's energy independence. Setting the scene for us this week is Fatima Sadouki, who is Montel's Brussels correspondent. Warm. Welcome to you Fatima.

Fatima Sadouki, Energy Correspondent, Montel: 1:00

Hi Richard. Thanks for having me.

Richard Sverrisson – Editor-in-Chief, Montel News: 1:02

Fatima you are following this closely. You're following what's happening in Brussels and what the what is the sentiment at the moment? What's the atmosphere like?

Fatima Sadouki, Energy Correspondent, Montel: 1:10

Well, there has been a lot of focus on the EU policy on boosting the competitiveness of its industries and bringing down. Energy prices. We've seen the launch of the clean industrial deal last week. But this week among top of the headlines the growing security concerns are taking precedence and a big issue that is. Being discussed is the need for the EU to increase its defense spending. Energy security is obviously top of the agenda as we know. It's not immune to security threat to say the least as we have seen with cyber attacks. And this is likely to create more competing priorities for the EU and the energy sector itself.

Richard Sverrisson – Editor-in-Chief, Montel News: 1:50

So it makes the new sort of geopolitical reality then we've seen, not energy, so much sidelined, but more defense coming to the fore. Is would that be fair enough to say?

Fatima Sadouki, Energy Correspondent, Montel: 2:01

Yeah, I think so. I was talking to a NATO official last week here in Brussels. And we were discussing security issue for energy just last week. And he was telling me that the eu but also the energy sector, private investors and energy players needed to boost investment to protect their energy assets. And he was telling me that this was a priority that the EU needed to shift to a wartime mindset.

Richard Sverrisson – Editor-in-Chief, Montel News: 2:26

Fatima, thank you very much indeed.

Fatima Sadouki, Energy Correspondent, Montel: 2:28

Thank you.

Richard Sverrisson – Editor-in-Chief, Montel News: 2:30

Joining us to discuss these critical issues is Kristian Ruby, secretary General of Eurelectric. A warm welcome to you Kristian and good to have you back on the pod.

Kristian Ruby – Secretary General, Eurelectric: 2:39

Thank you very much.

Richard Sverrisson – Editor-in-Chief, Montel News: 2:40

I know in sort of last year you often talked about the new world order, the geopolitics it's suddenly taken on a different speed, hasn't it really? We've kind of, the geopolitical landscape. Developing incredibly quickly now what do you make of what the, this sort of background how, what's your view here, Kristian?

Kristian Ruby – Secretary General, Eurelectric: 2:59

Yeah. Well, in essence we are really seeing a series of seismic shifts to the international order as we've known it. And it's happening all of this at warp speed. In fact, whatever we say today might be even outdated a few days down the line. In essence, what's happening is a fundamental shift in international relations where the US is taking a very different approach to its traditional allies from Europe, and a very different approach to the whole question of Ukraine. Just to start in one place. And that has a number of repercussions for European energy security policy and European energy policy as well.

Richard Sverrisson – Editor-in-Chief, Montel News: 3:46

Could you go into a little bit more detail that question? What are the implications here for energy security and energy policy for Europe?

Kristian Ruby – Secretary General, Eurelectric: 3:53

In essence what Europe has experienced for a long time now is that, that we have benefited from a situation where we had cheap security coming from the NATO alliance and the security guarantees extended by the US and we had cheap energy flowing from amongst others, Russia to Europe. That provided us with a little bit of a complacent attitude in some regards. And now the situation is that this is over. We can no longer necessarily rely on the security guarantees of the past, and we can definitely no longer rely on the energy imports that we've enjoyed previously. We saw that very clearly in 2022. So Europe essentially is. Home alone in this new world. And we need to learn how to provide ourselves with the necessary energy. We need to compete in a much more competitive, aggressively competitive industrial space. And we need to be able to defend ourselves. So this is setting out a very different challenge for the energy sector going forward. One we have to address in a different way than we have before.

Richard Sverrisson – Editor-in-Chief, Montel News: 5:03

Absolutely. I think it's clear as well as you mentioned that president Trump is ripping up the Transatlantic Alliance and all that kind of all the implications that can have for Europe and European energy policy and energy imports. But I. I'd like to focus just on one area in particularly now. Kristian, we've seen cyber attacks targeting critical energy infrastructure mainly power interconnectors, but also others. How serious is this risk and what can be done to strengthen Europe's defenses at this time when we may not have the backing o of the US anymore?

Kristian Ruby – Secretary General, Eurelectric: 5:39

Cybersecurity is a very serious topic for utilities across Europe. We're seeing a rise in cyber attacks against utilities, and we're seeing a rise in the number of successful cyber attacks. We've recently published an analysis of where this is headed. What I would say here is that this is one of. A series of challenges that European utilities are now facing, which is making the energy security and the security supply equation a very different one than it was just a few years ago. It's not like cybersecurity is a new topic as such, but it's. Risen very significantly importance. And it has been complimented by a another issue, which is the physical security of plants. We are increasingly seeing non-identified drones harbor over critical installations of our sector. We are increasingly experiencing sabotage attacks against critical infrastructure. And it is this new landscape where malicious actors are. Actually trying to damage or even destroy our electricity infrastructure that we need to basically deal with in a different way than we have before. What it specifically means with the new security situation, I think we need to address in a couple of different steps. If we look at what's happening in relation to, cyber attacks and attacks on critical infrastructure in, for instance, the Baltic Sea. What we need to do in the first instance is to operate differently. We need to activate our military apparatuses to cooperate and to, to basically act as a deterrent in relation to the actors that, that try to damage the infrastructure. Then on. A more operational level for the electricity sector. We need to do things slightly differently. My vice president who comes from Finland and has a lot of experience with with ominous types of attacks and threats to, to his power plants and infrastructure, he talks about an increased situational awareness that is required in the operations. He talks about frequent drills and exercises to basically handle difficult unforeseen situations. And he talks about increased contact with authorities at all levels and at and at very low levels of let's say threat or unusual events. So we need to. Transition from a time where we could operate in peace to a situation where we're not at war, but we're not at peace either anymore as the Swedish Prime Minister likes to say. So we, we need a different type of security approach to the sector in general.

Richard Sverrisson – Editor-in-Chief, Montel News: 8:31

And can we expect to see more collaboration between, say, utilities, grid operators and military and governments in general?

Kristian Ruby – Secretary General, Eurelectric: 8:40

We can't expect that, and we should expect that it's something that's going to be necessary in a world where electricity is going to be crucial. Even more crucial than today for the secure functioning of the energy system of society. We're electrifying our cars, our. Heating systems, our industry and as more of society relies on electricity, is really crucial that electricity stays reliable. And this is also the reason that when we, for instance, look to the hot war on the European continent in Ukraine there are very persistent efforts of the Russians to. Take out the electricity and energy infrastructure of Ukraine because they see this as an effective way of inflicting damage on the Ukrainian society.

Richard Sverrisson – Editor-in-Chief, Montel News: 9:26

And that's, as you mentioned, we're becoming increasingly electrified. We, we rely on it. Absolutely. So that's the, that that's to stress the importance of keeping that free from attack and a stable supply for our cars, for our wifi, for our hospitals, our schools and everything. That's an absolutely crucial point, Kristian. Moving on to another topic that's been in the news recently the European Commission. Has introduced new policies to support industry and keep energy affordable. What's your reaction to these latest policy announcements?

Kristian Ruby – Secretary General, Eurelectric: 9:57

So I was up in Antwerp last week where we sat down with von der Leyen to discuss this new deal. And overall, my take on this initiative is that it's a positive and necessary one. The commission has. Made the effort of really listening to the quite persistent criticism of too much bureaucracy too much hassle for business. And they have set out an agenda to simplify, to electrify and to stimulate demand for industrial manufacturing. I think this is necessary in this new world where we have much more geopolitical. Tension where we have much more aggressive industrial competition and where the products that we trade with partners, previous partners and competitors. Have a lot of implications for our security because they're intelligent at Tesla, has loads of cameras, has a very acute ability to collect information. And therefore we need to think about the ability of Europe to also produce the, this type of equipment. So overall this package is necessary. Now does it do enough of a difference? I think we have to be honest and say with the pace of change we're seeing in the world, we have to look at this as a first step in the right direction and acknowledge that more will need to be done. Things will, to some extent, need to be more handheld in the future because there are so many. Unknowns and so many unforeseens to be expected given the profound changes we're seeing these days.

Richard Sverrisson – Editor-in-Chief, Montel News: 11:44

Absolutely. And how it's very rapidly changing. And like you said at the start, what we're talking about today could be old hat by tomorrow. But do you think the measures are sufficient to protect Europe then from external pressures and internal political shifts and a kind of rise in populism, if you like as well, which we're seeing across Europe.

Kristian Ruby – Secretary General, Eurelectric: 12:01

I think in a nutshell what Europe is dealing with is a set of compounded crisis and this is what makes this situation so difficult. As I said, I think the direction is right and then we need to see. Just how much the individual initiatives will do. But to highlight some of the positive aspects of this, I think it is very wise to work with what we call lead markets with a targeted way of stimulating demand for certain type of product. Because while we need to. Ramp up our competitiveness and our ability to defend ourselves. It is crucial that we stay the course on tackling the climate challenge, even if others are forgetting about this right now. We need to insist on our path towards a climate neutral society, and what that means is that we need to stimulate demand for those products that today are slightly more expensive than their. Fossil fuel counterparts, but over time will prove to be more clean and more affordable once we get mass production going. So lead markets is a very welcome initiative as part of this broader package. Another thing that they're looking into is the Made in Europe requirements. This is a very delicate balance where we need to, on the one hand let's say prioritize and acknowledge the need for capabilities for manufacturing in Europe. On the other hand, the price dimension, because as you rightly said, we are in a situation where. Populist views are on the rise. And and where cost of living is a very big deal for the normal European citizen. So if all of a sudden we now say we can only have European stuff, it's gonna be very expensive and that won't be sustainable. Politically speaking. So we need to strike a fine balance on this. And and this is probably one of the areas where we need to work more to get the balance right and to make sure that there's a good sort of mix of cost efficiency on the one hand and let's say impact when it comes to stimulating European production on the other. Then the last point I wanna make here is, what about the energy. Component of this because affordable energy has been a key element in this discussion as well. The two sides of this, the first side is that the clean industrial deal rightly identifies electrification as the way forward. This has energy security reasons. We don't want to import too much fossil fuels anymore, but it also has to do with the fact that here's an indigenous resource, which is actually very cheap if we are able to price it in the correct way. And the clean industrial deal tries to square that circle by introducing measures to make it more attractive to lock in prices of renewables with so-called, power purchase agreements. These part purchase agreements will be more standardized than they have until now. And they will also be de-risked with designate tools that that the commission will now develop in conjunction with the European Investment Bank. So this is another positive element in the clean industrial deal.

Richard Sverrisson – Editor-in-Chief, Montel News: 15:22

So you, we've seen the commission as a plan to have the European Investment Bank offer 500 million Euros in bank guarantees to make long term PPAs more attractive and accessible. What difference could such guarantees make to, to power prices and volatility linked to gas prices in the long term?'cause that's obviously been a major should we say, a headache for some countries in particular.

Kristian Ruby – Secretary General, Eurelectric: 15:44

Yes. I think the first step to understand here, why is it that you'll want to essentially lock in renewable or nuclear production into these power purchase agreements? The reason here is that if you create an agreement between the power producer and the offtaker at a set price, that electricity would then not need to follow the wholesale market price, and that would mean that it would no longer be exposed to the volatility of fossil fuel prices. If gas goes through the roof for some reason of security supply, then of course electricity prices in the wholesale market will follow suit as long as gas sets the price. Now by putting the renewable or nuclear electricity in a PPA, you don't have to basically worry about the gas price for those megawatt hours in question. What about that de-risking mechanism? Let me explain a little bit here. Let's presume that there is an industrial company that approaches a CEO of a power company that says, Hey, I really need Terawatt hours of electricity. Build, an offshore wind park for me, or build a nuclear plant for me. I'm gonna give you a PPA. The utility boss says, that's fine. But what if you go bust? Who has the counterpart risk? Then? Am I lost? Is my investment in this new power producing facility lost? And this is where that guarantee from the EIB comes in and says, we're actually gonna extend a guarantee for parts of your investment that way, bring down the risk premium and also make the cost of capital lower. So there is a real potential for this mechanism to actually help. To get more investments off the ground and also reduce the risk premiums and hence ultimately the cost of electricity in that regard. So it's something that we've been asking for and it's something that we're very happy to see now be part of this package. Now it's really about the design and making sure that the details are all in the right place, but it is a very welcome step forward.

Richard Sverrisson – Editor-in-Chief, Montel News: 18:01

I think these, but it's also important to note of course, that the, these markets are electricity markets are, especially with the rollout of more renewables by their very nature, extremely volatile in terms of prices because of. If the sun doesn't shine or the wind doesn't blow, then obviously prices are gonna be very high. And when there's an oversupply, price is gonna be very low or negative. But I'd just like to move on to flexibility in the power system, Kristian. Why is, why is flexibility key to energy security?

Kristian Ruby – Secretary General, Eurelectric: 18:30

I think what you just said is, in essence one of the key issues that we need to reflect on and act on in the next few years, because whereas we all understand that renewables. Are a key part of our future and are really that indigenous resource that can help our energy security and help our advance towards the climate neutral society. We also need to acknowledge that they come with some. Impacts on the power system and the price formation in the power system. Indeed, what you just described is what we're seeing increasingly across Europe what I like to call rollercoaster pricing. We have the renewables in the middle of the day because the sun shines, prices go zero on negative. When we don't have any sun shine or any wind blowing, then all of a sudden prices go up very high. And whereas that makes sense in an economic context, this can be very difficult for citizens to accept and understand and. The normal citizen that comes home from work with two screaming kids and a lot of groceries, they're like, so it was free in the middle of the day and now it's gone through the roof. What's going on? I don't like this. And. Essentially what it means for the system is that in this new world with more renewables, we need really to get the balancing equation right. And that means we need flexible capacities as never before. We published a study on this recently and it is quite humbling to be honest what we need to do in the context of flexibility between now and 2030.

Richard Sverrisson – Editor-in-Chief, Montel News: 20:14

Could you please elaborate on those steps that needs to be taken? I know you've, that you've mentioned the study you've and a recent one that you've published is particularly on electric vehicles, EVs. So how they can provide flexibility to, to, to the grid. So what are the key takeaways here, Kristian?

Kristian Ruby – Secretary General, Eurelectric: 20:28

Yeah. So if we start with the good news and the recent study we've done on the flex potential of electric cars we really have a new vector for flexibility here if we get the frameworks and the technology and the infrastructure, and what we show in this study is that by 2030, we might be able to provide up to 4% of all the flexibility for for the system with the batteries from the electric cars that, that are gonna be all over Europe by then. What's also great about this is that this can save people a lot of money if they buy a fossil fuel. SUV. They will have one cost level. If instead they opt for an electric SUV, they might save up to 25% of the total cost of ownership if we are able to unlock that flexibility potential from the batteries. Now back to the societal equation here. As I said, it's around 4% of the flexibility we need that can be provided by electric cars by 2030. What that also means is that we need to think carefully about the remaining 96%. And that's why we are very adamant in your electric to say this is an all hands on deck approach. We need all levers of firmness and flexibility that we can mobilize for the system because, electricity is becoming so important for societal energy supply and the pricing and the stability of electricity is going to be so crucial for the political support, for the transition, that this is really a mission critical element of the equation to get the flexibility right.

Richard Sverrisson – Editor-in-Chief, Montel News: 22:20

But we still want the momentum needs to be there for, in terms of the take up of electric cars, doesn't it, Kristian? We're seeing in some countries, some they're moving the targets a little bit further towards 2040. But so you've got the 2035 ban on sales of new internal combustion engine motor vehicles. But do you think we moving in fast enough?

Kristian Ruby – Secretary General, Eurelectric: 22:42

So I'd say, first of all are we moving fast enough? Politically speaking, I think the targets are appropriate and very ambitious. They're appropriate from a scientific perspective. They're also very ambitious to actually reach so, so politically we're in the right spot with the existing legislation. Is the market moving fast enough here? I think we need a bit more work. Frankly, the good news is that we're seeing an increased pickup of electric car sales again in, in 2025. Some of the main markets have seen some significant increases in sales, which is good. The bad news is that it is not enough. In order to sort of, hit the curve for the 2035 phase out of new ice sales, we need to speed up, but I'm attaching some hope to the fact that we now see a new generation of of very affordable electric cars into the market. And frankly speaking for car lovers like myself, it's quite exciting. Every day, pretty much you have a new, really fascinating model come out, whether it's from some of the Korean manufacturers or many of the European manufacturers that are frankly really impressive in this game. I love what I see coming out of Renault. What I see coming out of VW, the new Audis are absolutely spectacular. So I'm really excited that, especially the European car manufacturers have hooked onto this trend are and are really upping their game and doing their very best to deliver fantastic electric cars for the market.

Richard Sverrisson – Editor-in-Chief, Montel News: 24:24

I drive a Skoda and I'm very happy with that. Kristian, the Skoda Enyaq Electric. That's a,

Kristian Ruby – Secretary General, Eurelectric: 24:28

oh, that's a beautiful one. I love that one.

Richard Sverrisson – Editor-in-Chief, Montel News: 24:30

Yeah, absolutely. But just to round off, I think I think it's a very exciting prospect to think of that, that using the fleet of electric cars as a backup battery for the grid, I think that's quite an exciting prospect and I think something that, you know, hopefully we will be able to achieve by 2030. But I know we're running out of time, Kristian. I'd just like to thank you very much for being a guest on Plugged In - the Montel energy news podcast. Thank you.

Kristian Ruby – Secretary General, Eurelectric: 24:53

My pleasure. Thank you.