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The subtle redesign of Germany energy policy agreed by the government in Berlin last week sends some important signals not for the German market but for the rest of Europe. Far from damaging the renewables business the move could be the salvation of the sector. Other countries, the UK included would do well to adopt similar measures. This would be the most effective way of responding to the urgency expressed in the latest IPCC report. Read more

Energy is a business where success and failure are determined by technical skills and deep commercial expertise. That is true – up to a point. But consider the range of issues facing the world’s largest energy companies in 2014:

  • how to handle the deterioration of relations between Russia and the west;
  • how to build businesses in the world’s growth markets such as China and India;
  • how to manage the complexities of working in areas such as north Africa where physical security is being compromised by the presence of terrorists groups and the absence of effective governments;
  • how to manage the very different attitudes to energy in different markets such as the German opposition to nuclear or the French opposition to oil and gas which happens to come from shale rocks.

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George Osborne in his Budget speech on Wednesday talked, correctly, about US industrial energy costs being half those of the UK. The situation has deteriorated rapidly over the past five years. His proposed response is worth quoting directly:

“We need to cut our energy costs. We’re going to do this by investing in new sources of energy: new nuclear power, renewables, and a shale gas revolution.”

This must be a speechwriter’s joke. A line written in where the content bears absolutely no relationship to reality. New nuclear at £92.50 a megawatt hour will double the current wholesale price of electricity. New offshore wind on the Department of Energy & Climate Change’s own figures, which many feel are too low, will cost more than £120/Mwhr. These are not secret figures. They are well known in the Treasury, as is the risk of generating capacity failing to meet demand. There was no mention of that little problem. Read more

This week’s meeting of the European Council in Brussels will be a significant test of the EU’s relevance and unity in dealing with the consequences of what is happening in Ukraine. Over the years as indigenous production, especially of gas, has declined Europe has allowed itself to become more and more dependent on Russian supplies. Last year Europe imported 160bn cubic metres of gas – a quarter of its total requirements. Even if Russia were a normal country that level of dependency would look high. Now, with Russia ignoring the strong messages from the German and American governments urging restraint in Ukraine, and massing troops on the border, reducing that degree of dependence is a matter of urgency. Read more

Putin at the launch of the Russian section of a Russia-China oil pipeline in 2010. (Alexey Druzhinin/AFP/Getty)

As well as demonstrating the courage of Ukraine’s people, the one thing that the country’s political crisis of the past few weeks has made clear is the weakness of Russia. President Vladimir Putin likes to present his country as a reviving world power but it is trapped by its own dependence on oil and gas.

The threats and sabre-rattling will no doubt continue. Russia may be able, and should perhaps be allowed, to keep control of the Crimea and its black sea naval base at Sevastapol – though history does suggests that current events are simply sowing the seeds of another long-running conflict there, not least with the Tatars.

Beyond that, however, Moscow is in no position to confront Europe or even the new government in Kiev. The Ukrainians must not allow themselves to be provoked by an Emperor who has no clothes. Read more