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Energy supply in the wake of Putin’s attack on Ukraine

Veronika Grimm holds the Chair in Financial Concept at Friedrich-Alexander-Universität Erlangen-Nürnberg (FAU). The power markets are one focus of her work. She has been a member of the German Council of Financial Consultants since April 2020. We requested the financial knowledgeable three questions.

Professor Grimm, you’ve expressed the view that it could be potential to do with out Russian fuel at quick discover. How would that be achieved?
Throughout the framework of the sanctions imposed in response to the Russian battle of aggression towards Ukraine, Europe ought to work in direction of rapidly and comprehensively lowering its funds to Russia for power imports. Due to the most recent value rises, Russia receives roughly 20 billion euros monthly from the EU. Russia may simply reply to any makes an attempt by the EU to cease these cost flows by halting its deliveries of power sources. It’s due to this fact necessary to organize for this situation by assessing the financial penalties and analysing methods to cope with the state of affairs. Economists have explored these points in quite a few research, one among which I used to be concerned in. Our conclusion was that it could be a problem and would end in a major financial stoop. If a supply ban couldn’t be averted for causes of safety coverage, nonetheless, it could be manageable.

One aim of Germany’s G7 presidency is: “Strong alliances for a sustainable planet”. Will the present developments not result in new dependencies?
That’s certainly one thing one ought to attempt to keep away from. The transition to local weather neutrality generates potential for diversifying our power imports: world wide, there are way more nations with glorious circumstances for renewable energies than these with out there sources of fossil energies. We will receive hydrogen and artificial fuels from them. That offers rise to new potentialities. Relating to sources that can be necessary sooner or later, we have to be certain that no dependencies emerge, although we’re already considerably late in doing this in some circumstances. We additionally need to look carefully at our commerce relationships. Nonetheless, one of many largest challenges of the approaching years can be that fossil fuels will grow to be costlier if we need to be impartial of Russia. This can pose a menace to our competitiveness in some respects.

Will the power transition now be given a lift?
I hope so. When fossil power sources are costly, it’s typically price switching extra rapidly to renewables. In different phrases, renewables create a chance for reducing power prices. Dependable framework circumstances will have to be put in place to set off the immense private-sector investments needed for the transition and to quickly develop the infrastructure required to move electrical energy and hydrogen. On this context, accelerating planning, approval and implementation processes can be of significant significance.

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