Europe’s energy transition: Full speed ahead?

After a summer spent exploring the technologies, markets and policies shaping Europe's energy transition, the final episode of the Plugged In Summer Series asks one key final question: is the green shift slowing down, or speeding up?

Richard is joined by two expert academics. David Reiner of the University of Cambridge and  Michael Grubb of University College London to explore what's next for the energy transition. Together, they assess how geopolitical instability, rising electricity demand and shifting global dynamics are reshaping the path ahead—from energy security and electrification to market reform, investment, China's growing influence and the future of clean energy policy. 

The conversation concludes by returning to the central question that has run throughout the series: is the energy transition accelerating, stalling, or taking a different path?

Host: Snjólfur Richard Sverrisson, Editor-in-Chief, Montel News

Guests:

Dr David Reiner, Professor of Technology Policy, Judge Business School, University of Cambridge

Professor Michael Grubb, Professor of Energy and Climate Change, University College London

Producer: Alexandra Carlon

Editor: Alexandra Carlon

#EnergyTransition #NetZero #EnergySecurity #ClimatePolicy #Electrification #CleanEnergy #ElectricityMarkets #Geopolitics #Decarbonisation #EnergyMarkets #MontelNews #PluggedInPodcast

Transcript

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Volatility Sets The Big Question

Professor Michael Grubb, Professor of Energy and Climate Change, University College London 0:00

Have we actually moved to the next stage of structural form that engages consumers in ways that make sense, how consumers actually really benefit from this transition? That's going to be fought over hard over the next three, four years.

Dr David Reiner, Professor of Technology Policy, Judge Business School, University of Cambridge 0:11

You know, by 2030, we should start to be seeing some at least leading indicators of what actually is happening.

Richard Sverrisson – Editor-in-Chief, Montel News 0:24

After a summer of market volatility and geopolitical tensions, we step back and look at the bigger picture. Could the current crisis accelerate electrification, or will political pressure and economic uncertainty slow momentum? Now I'm delighted to be joined by Michael Grubb, who's Professor of Energy and Climate Change at University College London. A warm welcome to you, Michael.

Professor Michael Grubb, Professor of Energy and Climate Change, University College London 0:49

Thank you very much.

Richard Sverrisson – Editor-in-Chief, Montel News 0:51

One of the key questions we're going to be discussing today is whether the energy transition is speeding up or slowing down. What's your view? Are we seeing a backlash against some of the sort of green policies in the UK and across Europe?

Global Acceleration Versus Europe’s Pushback

Professor Michael Grubb, Professor of Energy and Climate Change, University College London 1:06

So I think the answer is globally it's accelerating. In the US, there are some slowdowns. We tend to have a fairly sort of European Western hemisphere view where it's more contested. But I think the really the big story is on a global stage, that's becoming less and less, you know, the dominant share at all of the global transition. So I think the short answer is it's accelerating when you take a global view.

Richard Sverrisson – Editor-in-Chief, Montel News 1:33

And it from a European perspective?

Professor Michael Grubb, Professor of Energy and Climate Change, University College London 1:35

In the European perspective, it's more contested, but I think accelerating, particularly in the light, obviously, of the Hormuz crisis. And I think we're seeing that not just in the renewables policy generally, but crucially on some of the responses around electrification as well.

Richard Sverrisson – Editor-in-Chief, Montel News 1:51

What in your view are the biggest factors that will determine whether Europe accelerates or stalls over the next five to ten years?

Professor Michael Grubb, Professor of Energy and Climate Change, University College London 1:59

I actually think aside from an obvious issue about what exactly happens in the Middle East and the Straits of Rodlands, there are a bundle of other things more directly under European control. But let me tackle the first of those first. I think that you had an inevitable short-term reaction to the Iran war, spike in fossil fuels, there was a sense of, oh no, not again. We had this only four years ago, a lot of pressure on governments to say, why haven't you sorted this out? Government narrative, clean energy is helping to prevent us, but consumers seeing the rise in bills. Now, I think that a certain amount is going to hinge on whether and how much that crisis is resolved and whether it seemed to take the heat out of the narrative of we just cannot afford to continue such dependence on fossil fuels. But I don't think that is ultimately going to be the dominant factor. I think in Europe, the bigger questions, we're at a big stage in the energy transition in itself, because the policies we had were very much drive more clean energy investment. Now those are starting to dominate the system, particularly of electricity, and the issue is much more around market reform, redesign of contracts which have supported renewables, the engagement of consumers. So they actually personally start to see the benefits of it rather than just politicians promising them that clean energy is a good investment and hedge against fossil fuels.

Why Bills Rise During Transition

Richard Sverrisson – Editor-in-Chief, Montel News 3:28

Is there a sense maybe that if you mentioned consumer bills, you know, households as well as industry aren't seeing costs come down, that there could be a backlash against those kind of policies?

Professor Michael Grubb, Professor of Energy and Climate Change, University College London 3:40

Yeah, I mean, at the moment, basically European and certainly UK energy prices are amongst the highest in the world, and that is a really bad basis to say, oh, this clean investment has been great. The fact is we're basically paying for two systems at the same time. We're paying for the old system because electricity is still largely dominated by the marginal cost of gas across the vast majority of the time. And we're paying the legacy payments of some of the earlier renewables more expensive as well as the current rounds. So, like, yeah, there's a real problem in the way that the transition is feeding in through to bills right now. So to me, that basically means the success of the European or the acceleration of a European transition will hinge on market reforms, which enable consumers, we have a much bigger role for consumers directly for accessing renewable energy and clean energy in a way which frankly is not the current market design, does not deliver.

Local Markets And Flexibility Rewards

Richard Sverrisson – Editor-in-Chief, Montel News 4:37

What's needed there? A fresh market design and more policy measures or patchwork? I mean, or complete a new design of the system?

Professor Michael Grubb, Professor of Energy and Climate Change, University College London 4:46

Well, complete new design is really hard. We to some extent tried that in the UK with the review of electricity market arrangements, Germany, big debate around locational and zonal pricing, and by and large, those top-down efforts for major reform had actually failed. And I think that is troubling because there was a good intellectual case for them, but frankly, massive reforms are very difficult, particularly in our kind of societies. So I think we need to be looking for like pathways towards deeper reform. And I think that needs to start with a couple of things. First, there has not been enough attention to the local benefits and local renewables. It all gets sold through a national price or the European wholesale market. And that's kind of crazy if we're in a situation of sometimes paying renewables in one place not to generate because the grids can't cope, paying fossil fuels to fire up because we can't get the yeah. So we need some more development of local electricity markets. And that has to be accepted as a fundamental part of the pathway. And those local electricity markets should also reward flexibility so that your electric vehicle can become part of the system. So I think that's a crucial part of it. There are quite a few different ways of doing that. We ourselves have looked at routes of green power pools, which in effect provide a distinct channel for renewable energy to be purchased by consumers, potentially through somewhat longer-term contracts than you're having a day ahead market. But those kind of reforms don't have to be all at once overturning the system, but they really need to be grown and encouraged. So I think if you like it's not at one level a big bang shift, but it's a major shift of how policymakers think about it because they've been so used to it and they've got such close relationships to renewable investors who, of course, want government-backed contracts all the time, and consumers are not getting a look into the benefits at the moment. Nothing works efficiently. And I think that's going to be the biggest single thing.

Richard Sverrisson – Editor-in-Chief, Montel News 6:55

Because I mean, this is what I'm hearing also in this summer series, Michael, that you know, there's little communication or dialogue with local populations, with energy consumers, and actually providing them with the benefits of green energy, as in when there's overproduction, actually getting it very, very cheaply. So, I mean, how do you tweak the system to allow for that to happen?

Professor Michael Grubb, Professor of Energy and Climate Change, University College London 7:16

First of all, you've got to be clear in both communications and policy. In Britain, we're in a situation where the price of electricity to household consumers is about 26 pence per unit plus a standing charge. The most recent auctions for renewable energy were between six or seven for onshore renewables and nine for offshore. So there's a huge gap of additional costs that consumers are paying. Some of that is unavoidable, some of it is necessary network investment, but some of it is inframarginal rents for renewables to be doing very well, and of course they're trying to protect their ongoing profits. But that psychology's got to be broken down. The renewable energy industry has to show its benefits to consumers directly, not just by saying, Oh, it's protecting us from fossil fuel volatility. Because at the moment it's largely not. Not in the eyes of consumers.

Let People Buy Renewables Directly

Richard Sverrisson – Editor-in-Chief, Montel News 8:15

So how do you do that in practice then?

Professor Michael Grubb, Professor of Energy and Climate Change, University College London 8:17

So it depends how geeky you want to get in the answers.

Richard Sverrisson – Editor-in-Chief, Montel News 8:20

Well, I'm all for geekiness, Michael. This is that's part of this this this podcast is also very niche and and geeky at times, so that's fine.

Professor Michael Grubb, Professor of Energy and Climate Change, University College London 8:28

I can geek away. Look, there's there's a few things you can do. One broad level, you absolutely can recognize that a renewables-based system is in many ways a different commodity. It is based on capital assets, not fuel costs. It's based upon variability within which the ability of storage and consumers to flex is valuable. You can create a market structure which allows suppliers to buy directly that pool of renewable energy, and then either you can structure it that the suppliers also contract with what would be called effectively a sleever or someone to help balance them when there's not enough renewable energy, or you create a pool which itself just buys the top-ups from the wholesale rest of the wholesale market when it needs it. So that's been pretty well articulated. The government review acknowledged that could work, but basically said, oh, it's too radical. It hasn't been tried anywhere. To me, that's not a sufficient answer. So yeah, basically treating renewables-based electricity system as a distinct commodity which requires a very different market structure and allowing consumers to buy it directly through that structure, I think is crucial. Doesn't mean they'll cover 100% of all their electricity all the time through that because of variability, but that fundamentally is the signal they need and the access they need.

Richard Sverrisson – Editor-in-Chief, Montel News 9:58

These markets are already very, very complex. Would that be adding another layer of complexity to the system?

Professor Michael Grubb, Professor of Energy and Climate Change, University College London 10:04

So if I were giving a presentation, I could show a slide which says the argument is this would add complexity to the system. As compared to the current system, where in the UK we've got contracts for differences which involve suppliers repaying the generators when there's a difference between strike price. And we've got renewable energy, which requires the following sorts of top-ups. We've got these additional payments, we've got 22 different bits of markets with plaster added on top to try and hold this system together at the moment. You're telling me the problem with allowing consumers to buy renewables directly is because it's too complicated? It's a hell of a lot simpler than what we've created now.

Richard Sverrisson – Editor-in-Chief, Montel News 10:42

I think that's a very fair point, Michael. I think we don't need 22 plasters. I think maybe one or two should suffice. But if we're looking ahead to 2030, what would convince you that the world, and maybe Europe in particular, has entered an acceleration scenario of the energy transition?

The 2030 Signals That Matter

Professor Michael Grubb, Professor of Energy and Climate Change, University College London 11:00

So I think there's a few things. Look at the world first. I would say China and India already moving in that direction. But to see that across the whole of Asia and increasingly rapidly, Africa, I think we already really see the momentum there. It's building up in Africa, it's still a modest share of the energy system, but it's already displacing the incumbent system. And you'll say see yeah, headlines from South Africa and others, people basically deserting some of the existing structures in favor of renewables. And I think that I would expect to accelerate and to start dominating the volumes in electricity. And I think the other big area is around transport and electric vehicles, because that changes a lot of other things in the system. So the second index I would look at globally would be whether investment in fossil fuels is collapsing. That's perhaps the biggest single indicator as to whether that, you know, vastly rich system that's been built up over the last century is finally realizing and acknowledging where the world is going on this. And that will probably be more to do with transport and the related oil markets than others. In Europe, I think that Europe is a step ahead in a sense. And I think maintaining it, the indicators are going to be somewhat different because we already see the dominance of renewables in electricity with close to 50%. I think the next phase is kind of things I touched on, which is structural change in the energy system, such that consumers really start to see directly the benefits, such that if well, basically that most people want an electric car because they're as cheap to buy it, they're cheaper to run, and they can make money by plugging it back into the grid. Now, that is basically the structure of the energy system that we need for the 21st century. Europe is actually not there yet by any stretch, and that's still being contested. But that to me would be the metric. So the metric in Europe's a bit different. Have we actually moved to the next stage of structural form that engages consumers in ways that make sense, help consumers actually really benefit from this transition. That's going to be fought over hard over the next three, four years.

Richard Sverrisson – Editor-in-Chief, Montel News 13:20

And getting the consumers on board is going to be absolutely crucial. Michael, thank you very much indeed for being a guest on the Plugged In podcast.

Professor Michael Grubb, Professor of Energy and Climate Change, University College London 13:27

That's all right. Thank you very much indeed.

Is This A New 1970s Moment

Richard Sverrisson – Editor-in-Chief, Montel News 13:29

Michael Grubb, focused on what Europe needs to do next. To step back and look at the bigger historical and geopolitical picture, I turn to David Rainer, Professor of Technology Policy at Cambridge Judge Business School. A warm welcome to you, David.

Dr David Reiner, Professor of Technology Policy, Judge Business School, University of Cambridge 13:44

Thank you, Richard. It's a pleasure to be here.

Richard Sverrisson – Editor-in-Chief, Montel News 13:46

We often hear a lot about the comparisons to the 1973 oil price shock. So one of the big questions facing policymakers is whether the current crisis could trigger structural energy system change in the same way that the oil shock did in the 1970s. Do you see this as a meaningful historical parallel?

Dr David Reiner, Professor of Technology Policy, Judge Business School, University of Cambridge 14:06

If you look at volumes in terms of the disruption, I think clearly that that is the case. It hasn't had the kind of the knock-on price effects that you might that many of us might have expected six months ago if you were to tell us that the streets of Hormuz would be shut for so long. But I think there is some definitely some quite meaningful comparisons in terms of the recognition on the part of many governments that they need to change business as usual, which is, I think, what was set in motion by the oil crises of the 70s. And then I think this could at least potentially have it have similar sort of structural changes.

Richard Sverrisson – Editor-in-Chief, Montel News 14:41

During the 1970s, the energy crisis ultimately accelerated efficiency improvements, diversification, and structural reform. So is today's geopolitical environment capable of producing a similar transformation?

Dr David Reiner, Professor of Technology Policy, Judge Business School, University of Cambridge 14:54

Aaron Powell If you think about the two largest economies, they seem to be going in kind of opposite directions, or they were already going in large opposite directions, largely unimpeded by this current crisis. So the Chinese were doubling down, tripling down on electrification, and the US, under the Trump administration, very much emphasizing the fossil rejuvenation of fossil energy. So in the case of those two largest economies, it's less clear that that's going to have as much of an effect. But on the vast majority of everybody else, I think you can say that they will be responding to the signals that have been produced through this current crisis. We have crisis upon crisis upon crisis, right? Starting with COVID, and then maybe more dramatically in terms of energy, the Russian invasion of Ukraine in 2022, which which in terms of the gas supply in particular to Europe had a much more dramatic impact. So we're already feeling kind of the impacts of those that has led to substantial electrification of industry as kind of precipitated this quite remarkable shift away from Russian gas. But the diversification to expand to bring in LNG, notably from the Gulf, was a big part of that kind of post-2022 strategy. So now that itself has been brought into question by the by the current events in the Straits of Hormuz.

Richard Sverrisson – Editor-in-Chief, Montel News 16:30

And what could a post-2026 strategy look like? Winning the continent off LNG for certainly from the Gulf, or what are the other options?

Dr David Reiner, Professor of Technology Policy, Judge Business School, University of Cambridge 16:39

It's not settled, right? I mean, I think if you were looking at the equivalent situation in 1980, we wouldn't have necessarily been able to uh you know explicitly identify which ways some of the changes would have happened. But I think clearly, I mean I think changing our kind of long-term reliance on LNG, but I think particularly speeding up the electrification of our vehicle fleet would be an obvious way in which we could we could reduce our dependence on oil and gas from the Gulf.

Affordability, Heat Pumps, And EVs

Dr David Reiner, Professor of Technology Policy, Judge Business School, University of Cambridge 17:10

A lot of governments are sort of balancing long-term decarbonization goals against immediate affordability and energy security concerns. So, from a policy perspective, what are the most important levers that could turn a near-term slowdown into acceleration over the next decade? I mean, the tension, of course, is that we we have had this struggle already, right? And we're still facing some of the pressures associated with, if you want the populist backlash in European politics, which very much makes a lot of the push to decarbonization. So, you know, the populist right is very much identified net zero and if you think of the AFD in Germany in their last election campaign, they focused on on heat pumps for example. Heat pump mandates as kind of a big source of electoral opportunity. So so you know, I think the challenge, of course, is how do you entangle all of that? Because this was kind of all already in motion in 2025, right? So I think that's one question already. And then if you're looking at policy instruments, I mean I think the challenge you have, if you think of a country like the UK, for example, we've loaded our electricity costs, you know, the cost of decarbonization on electricity prices. They've finally are shifting away from that. But that has undoubtedly kind of discouraged the shift to greater electrification in a country like the UK. So if you look at something like the acceleration of heat pumps, it's inevitably has favored those countries where the price differential between electricity and gas very much favors electricity. Where as a country like the UK, which gives generous subsidies to gas consumption, it's a very different situation. So if you really wanted to tackle, if you really wanted to grasp the nettle, you would try and do things like tackle that differential. Politically, of course, that's that's really challenging.

Richard Sverrisson – Editor-in-Chief, Montel News 19:10

No, absolutely. You know, you could say technology policy is increasingly shaping industrial strategy, energy security, and competitiveness. So how important are state-led industrial policies such as subsidies, local content rules, strategic investment incentives, et cetera, in determining the speed of the transition, David?

Dr David Reiner, Professor of Technology Policy, Judge Business School, University of Cambridge 19:30

I mean, if you go back to something like the massive growth we've seen with solar, that was at least in part driven by the quite generous support that European governments, Germany, and others provided to residential and other solar users. And that enabled the Chinese to greatly expand their solar production and has helped drop costs down over the past 10, 15 years. So support for decarbonization, support for renewables has been there throughout. What's much more notable just over the last couple of years, though, has been somewhat protectionist, nationalist view of how to how to get this going through industrial policy. Whereas the EU has historically been quite skeptical on state aid and has come down quite heavily on kind of overly generous support of domestic industries, partly as a result, you know, ironically, now of the U.S. Inflation Reduction Act under the, under the Biden administration. You know, the EU came back with its net zero industry act, which kind of very much focused on kind of made in Europe local content. So I think there's a lot to play for in terms of this. I think it's not a settled debate. I think there are questions, for example, over, as I said, electrification of transport. So will we be just accepting shipments of Chinese, Chinese electric vehicles? Or will we, for example, be you know, encouraging more as happened with, again, if you go back to the 80s, the Japanese set up their plants in the UK and in the rest of Europe. And that actually had had a big effect on revitalizing, say, the British automobile industry. So could you imagine a world where that was the case? I think a lot of this has not yet been fleshed out. I think there's still a lot of questions as should we be just slapping on tariffs onto Chinese electric vehicles, or should we at the same time encouraging production of BYD and other electric vehicles within Europe? I think that's a big, big question that's still not yet been been sorted out.

China Supply Chains And Security Trade-offs

Dr David Reiner, Professor of Technology Policy, Judge Business School, University of Cambridge 21:50 Richard Sverrisson – Editor-in-Chief, Montel News 21:50

There's a crossover here between defense policy as well, isn't there, where you have security concerns around solar panels and even some wind turbine management. Manufacturers recently coming out. And there's a sort of bit of a backlash against these elements of the energy transition, these important elements, crucial elements, if you like, coming from China and others, but China in particular. Do you think that kind of backlash could slow down the transition in in Europe in particular?

Dr David Reiner, Professor of Technology Policy, Judge Business School, University of Cambridge 22:19

That is a big concern. I think the fact that we've benefited enormously from our very cheap solar panels that we're able to purchase from China as well as the rest of the world. It probably even had more dramatic impact in countries where energy access is a much bigger issue. So I think that is potentially important. But again, there was arguably a much more effective effort under the Biden administration to try and kind of come together against, you know, against China because of concerns over their dominance of many of these clean energy supply chains. I think because of the current tensions between the US and Europe and other other parts of the traditional Western alliance has kind of fractured our ability to kind of more effectively act against this potential Chinese dominance. So whereas a couple of years ago, you had this sense that there was a marshalling of some sort of unified opposition to Chinese dominance in this space. I think that's much harder to imagine given the current tensions over the Trump administration performative attacks on Greenland and so on. So I think a lot of this is, again, unclear. I think there's a recognition in security circles that over-reliance on China in so many of these areas is problematic. On the other hand, we don't have very many good solutions. You know, is the solution to kind of slam on the brakes on in terms of our decarbonization efforts? Is the alternative to do this in-house, within Europe, which the costs start to look eye-watering? So I think that's the big question, you know, going forward. How do we how do we imagine that this would actually happen?

Richard Sverrisson – Editor-in-Chief, Montel News 24:22

I'm happy that others are left to these very, very difficult decisions in a way. Of course, our job is to enlighten them to ensure that they make the best kind of decisions. But David, if we come back to the current crisis, the third in six years, as you highlighted at the start, some are saying that markets are underestimating how difficult the transition will be, while others would say that policymakers are underestimating how quickly structural change can occur once momentum builds. I mean, where would you sit there?

Dr David Reiner, Professor of Technology Policy, Judge Business School, University of Cambridge 24:53

I would probably agree with both to some extent. I mean, there's a sense in which these transitions are very slow, right? So many of these kind of solutions that we've been hearing about, you know, from Perovskite solar cells to, you know, you know, that these things have been around for decades, right? So the solutions are have always proven to be a bit slower than many of the proponents would like. On the other hand, you do see potentially these kind of dramatic shifts. I mean, again, back to electric vehicles. In China at least, something like two-thirds of kind of automobile models are the the electric vehicle version is cheaper than the traditional internal combustion engine version. That could potentially have this huge flip in terms of the uh willingness of consumers to purchase those sorts of cleaner alternatives. So, what you see sometimes is that you know these things, you know, sort of undetected trundle on for many years, and then all of a sudden we do see this pretty dramatic change. The problem is it's not always clear when that when that transition happens. You know, what is it, you know, what is it that really kind of flips it from kind of the more traditional model to kind of the the newer model? And I think that's where we are. I think it's you can come up with plausible narratives about how this could happen in a number of different sectors, a number of different areas, but you know, the proof is in the pudding. We've yet to see as many of these switches happen as as quickly as we might hope or want.

How Fast A System Flip Happens

Richard Sverrisson – Editor-in-Chief, Montel News 26:38

Once that switch happens, it could happen extremely quickly as well, isn't it? If we look ahead, it's time to get the crystal ball out now, David. So if we look ahead to 2027 or 2030, what indicators would tell you the world has generally entered an acceleration pathway rather than a fragmented or stalled transition?

Dr David Reiner, Professor of Technology Policy, Judge Business School, University of Cambridge 26:51

Well, I mean, 2027 continued Trump administration and so on, I mean, it's to continued fragmentation, right? There's no way around that. This is fundamentally different mindset, different, different approaches. And also I would argue that 2027 would be too early to detect some of these shifts, right? Do you have the support from the part of governments? Do you have the investment decisions that are being made in the private sector that would indicate that some of these things are either accelerating or decelerating? I mean, you would be, I think, presumptuous in 2027 to be you could be pointing to some press releases and these sorts of things, but you wouldn't be able to really see that more convincing shift. I think by 2030, you know, four years' time, you know, then you would start to see that the types of decisions that are being that would need to be made on the on the part of investors, kind of leading firms, governments, and so on, that would indicate either we are we've looked at it and we've decided, you know, this decarbonization thing is too, is too challenging, or that actually this is our way of preventing a kind of continued reliance on this kind of proven unstable region, unstable setting. So, you know, by 2030, we should start to be seeing some at least leading indicators of what actually is happening.

Closing And Where To Read More

Richard Sverrisson – Editor-in-Chief, Montel News 28:26

David, thank you very much indeed for being a guest on the Plugged In Podcast. And to you listeners, thanks for listening to this episode of Plugged In. If you enjoyed this discussion, please like, rate, and follow to make sure you get the latest podcast episodes as soon as we release them every Thursday. Finally, you can head to montelnews.com for more news and analysis from our team of journalists across Europe and beyond. See you next time.