Europe at a Crossroads: Innovation, Energy, and Competitiveness

Guest

Kadri Simson

European Commissioner for Energy

Transcript

Kadri Simson: So, in the August they had blackouts that lasted as long as 16 hours. Now last week, when I was in Kiev, life is almost as normal as it could be, but it’s summertime.

Jason Bordoff: Right.

Kadri Simson: So, winter demand and cities without district heating will be miserable places. Cities without electricity will mean that there is no access to water, sewage doesn’t work, and all the consequences of these things will force people to move.

Jason Bordoff: Europe is facing a critical challenge. When it comes to advanced technology innovation, labor productivity, and affordable energy, it’s not keeping up with the U.S. or with China. At least that’s the take from Mario Draghi, former European Central Bank President, in his European commission report last month titled, The Future of European Competitiveness. The last five years for the European Union have been tumultuous, from the pandemic to an energy crisis sparked by Russia’s invasion of Ukraine, to the European Green Deal. How Europe moves forward in the face of these challenges will directly impact its short and its long-term energy security, and the pace of its transition to clean energy. And it’s all playing out against the backdrop of an ever-worsening climate crisis. Now more than two years after Russia invaded Ukraine, is Europe’s energy crisis over? How are high energy prices impacting Europe’s industries? And what’s the state of Europe’s energy transition?

This is Columbia Energy Exchange, a weekly podcast from the Center on Global Energy Policy at Columbia University. I’m Jason Bordoff. This week, Kadri Simson. Simson has been the European Commissioner for Energy since 2019. Before that she was the Estonian Minister for Economic Affairs and held various other positions in the Estonian government. Commissioner Simson visited the Columbia campus during Climate Week in New York City. We discussed the impact of Russia’s attacks on Ukraine’s energy infrastructure, Europe’s progress in weaning itself off Russian gas, and member states’ attitudes toward nuclear power among many other topics. I hope you enjoy our conversation.

Commissioner Kadri Simson, great to see you again, and thanks for coming in-person here to Columbia Energy Exchange at Columbia University SIPA. It’s good to see you.

Kadri Simson: Thank you for having me.

Jason Bordoff: So, you’re coming to the end of your term as the European Union Energy Commissioner. And I just wanted to start by, there’s a lot to talk about about what’s happening in the world today. But I just wanted to maybe start by stepping back and asking when you reflect on your five years, I think, what do you think about with that remarkable period of time with energy crisis, urgency of climate change? How do you think about your biggest accomplishments? And maybe we’ll talk about the things that we could have done even more on than we did.

Kadri Simson: This is very true that the European Commission is in the middle of transitioning. That means that already in June we had elections. And as a result the European Parliament created a broad coalition that supports Ursula von der Leyen so that she gained her second mandate. But now all her nominees for next commissioner posts have to pass the hearing procedure in the European Parliament. And it takes some time. So, we hope that by the end of this year there will be new ministers and new commissioners in place. And we already know the nominees. Because each and every member state, and out of 27 there will be 27 commissioners, had a right to nominate someone, and then the president decides who will have what responsibilities. I started my term five years ago, 2019, and already then it was clear that the commissioner responsible for energy will play a significant role on our Green Deal approach. So, this was our flagship initiative announced already in December 2019, and by doing so we made a promise that we’ll cut our greenhouse gas emissions by 55% compared to 1990 levels. But we have cut our …

Jason Bordoff: You probably didn’t anticipate it would be quite as interesting a job with the worst energy crisis in a very long time, in addition to the challenge of the Green Deal and decarbonization.

Kadri Simson: Indeed, we did not then. But the very moment when Russia started its unjustified war against Ukraine, we knew that we were in deep trouble, not because of our Green Deal, but due to the fact that we were not green enough. In 2022 we were still too much dependent on imported Russian fossil fuels. So, it was relatively easy to get rid of coal. This was one of the first sanctions that we introduced against Russia to send a clear message that aggressor always has to pay a price. We got rid of Russian coal. The next steps were to get rid of Russian crude oil and refined products. But with gas we were in difficulties, because 40% of gas the European industry consumed and our households consumed came from Russia. And somehow Russia made a miscalculation. They thought that if they will cut our economies and if they, made by unilateral decision, will not service long-time contracts, we will be forced to negotiate with Moscow.

In 2022 we faced this difficulty that we had suddenly not a sufficient supply of natural gas. Luckily it was in the springtime, so we are in an extremely difficult situation during the wintertime because 40% of the gas Europe consumes is for heating purposes. But they cut us off in the springtime. And we were able to create a strategy to find alternative suppliers to replace natural gas with other alternatives. And of course, then all the emergency measures just to well-reduce our gas consumption by 18%. And only this spring, spring 2024, we were in the position where it was fair to say that we don’t need emergency measures anymore. We are out of danger. We don’t face a situation anymore that some of the sectors will not have access to sufficient supply.

Jason Bordoff: Is the European energy crisis over?

Kadri Simson: Yes, it is over. Well, our prices are now stabilizing and they are at the higher level of the pre-war level.

Jason Bordoff: They’re still about twice what they were before the crisis, right? I mean, it’s not what it was at the peak of the crisis where it increased so dramatically, but it’s still higher.

Kadri Simson: It’s clearly not the price that we paid during the peak. They are somehow higher also due to the fact that now LNG plays a more important role. So, the LNG prices are public. We monitor them via online platforms. But with LNG prices you have to keep in mind that the very moment when they are sold to European traders, for example, in the East Coast of the U.S. then these cargoes might be resold several times, and each time the price is increasing a little bit. This is different with pipeline supplies from Norway or from Azerbaijan or from Northern Africa where prices are agreed based on bilateral decisions.

Jason Bordoff: Yeah. Can I ask about that? The crisis is over. I think things look like they will be fine this winter, maybe not in Ukraine and Moldova. I’ll come to that in a minute, because you’ve been a powerful voice warning people about the humanitarian catastrophe that could be coming there. And I want to make sure our listeners know about it. I feel like it’s, at least on this side of the Atlantic it’s not getting as much attention as it should how terrible the situation is there. But for Europe as a whole storage levels are more than 90% full. And I guess by the end of the year we lose 15 BCM probably of transit through Ukraine. But it looks like this year, next year, probably okay.

But the point you were making about a big part of the reason why is a shift to the global LNG market. And I should say also a lot more renewables, so that is wonderful and we can talk about that. But when you say the crisis is over, is that kind of for now, or is it a situation where every year it depends on what’s happening in the global market and what’s happening in Asia? You’re connected now to a global LNG market, and dependent on it, that might be more volatile, that might see disruptions, that might see something happen with trade flows in the Middle East, or who knows? Is that a new risk?

And it was interesting, in the Draghi report on competitiveness, which I’d love to hear your thoughts about, I think he made a comment about that and pointed out the dependence on spot prices creates more volatility and I didn’t know if that was a suggestion that actually Europe should be signing long-term contracts for price stability. But then there’s a concern about where you want to be with the transition 10, 15, 20 years from now. How do you think about the new risks that are created by being more a part of the LNG market?

Kadri Simson: This is very true that this energy crisis that we faced, and it already started late 2021, but the peak was in 2022, was all about that there is not enough supply. And there were first case scenarios that would have suggested that someone in Europe, most likely the European Commission, has to take a responsibility and tell to the consumers who will have access to gas and who has to be curtailed. We avoided that. It was very costly, but as a result there were no regulatory measures. Only the consumers themselves reacted to the price signals, and of course, households changed their behavior. Now of course, we are facing the difficulty that still our energy prices are significantly higher than they are, for example, here in the U.S. The explanation is also clear. We don’t produce enough fossil fuels ourselves. We are the major global importer for fossil fuels.

At the same time, America and the United States produces enough to export. And the only sustainable alternative for us can be fast-stacking renewables and electrification. This will be also a priority for the next mandate to electrify sectors where it is possible, to bring online more renewables, and to scale up hydrogen economy. Because our industry, for example, clean steel factories will consume a lot of green hydrogen and we have been incentivizing already without the project promoters in such a way that the green steel facilities are really being built here in Europe or [inaudible 00:12:02]. And Draghi’s report addressed a lot this competitiveness issue and advise-

Jason Bordoff: And for people who listening who may not know, this was Mario Draghi wrote a very long and significant report with recommendations to the commission on how to improve European competitiveness and security.

Kadri Simson: Well, I can only agree with him, because this has been our approach that we will interconnect our different electricity markets. The single European energy market allows our renewable producers to feed in more renewables, and that actually also lowers prices all across Europe. So, we are investing a lot into cross-border electricity cables. Now we are also willing to invest into offshore grid connections, because for example, North Sea, one of our sea basins has a huge potential to produce electricity. Different governments have agreed that they will bring online 111 gigawatts of offshore electricity by the end of this decade. And by doing so we actually can make plans that our electricity system will be largely decarbonized very soon. So, gas and coal will be out and already this year-

Jason Bordoff: Natural gas will be out the power sector.

Kadri Simson: It is only there for well balancing reasons then. But as we are opting for merit order in Europe, then renewables and nuclear to provide the cheapest alternatives already now. And what has happened since Russia started to manipulate our energy markets, renewables are coming online very fast. And this year so far wind and solar has produced more electricity than all the fossil alternatives combined. So, this is happening in power sector and this is the reason why we will now also fast-track electrification.

Jason Bordoff: I should know this number, but because I think European gas demand is down around 20% or so from just around when the crisis started. And a lot of that is industrial activity, a lot of that is heat. What percentage of gas use is the power sector, do you know? How significant is that?

Kadri Simson: We mapped our consumption in the beginning of 2022, and 30% went to the power production, 30% to the industry and 40% to the heating purpose. And all these segments they actually cut their consumption. But in power generation, indeed renewables, they’re brought online very fast.

Jason Bordoff: Overall, when you look at the renewable targets you had, the climate goals Europe has, what’s your assessment after your five-year term on how Europe’s doing on its targets?

Kadri Simson: At the peak of the energy crisis we negotiated is our parliament, our targets for 2030 and we increased them significantly. We put into our legislation a target that from overall energy consumption, and this is not anymore electricity, this is also industry, transport, heating. The renewables have to cover 42.5%. We had the previous target for 2020 and that target is only 20%. So, we have to double the share of the renewables and even more. And right now 27 governments are providing their national plans to explain in detail how do they aim to achieve that. And if there is a cap, ambition cap, then we will not lower our overall union target. But then commission has to present some kind of incentives, because well, this timeframe to achieve 2030 targets now is very short, especially for NH sector five years.

So, these incentives have to bring online more renewables. Of course, we have also set specific targets for industrial players and transport that if they are the consumers of hydrogen, then certain share of their hydrogen that they consume has to be green. So, by doing so we replace also gray hydrogen with a greener alternative.

Jason Bordoff: Talk about how you see meeting those goals by 2030, including eliminating gas from the power sector given how the growth of renewables looks? Europe has done a remarkable job putting in place more renewables, breaking records for solar deployment. But when you look at some of the plans that some big companies had, some of them have announced a slower timeframe where they’re pulling back, because this higher cost of capital, interest rates, supply chain problems, costs are going up, offshore wind for example. Do you see more challenges now to try to get to those renewable targets by 2030? And what does the commission need to do or national governments to make sure that you stay on track for that?

Kadri Simson: I think that our biggest challenge right now is to upgrade the Crete connection, transmission lines, but also distribution infrastructure. And this is challenged, despite the fact that union and our markets are the best interconnected markets globally. So, we do have a very good system that allowed us to avoid any kind of risk. For example, even for blackouts at this difficult time when Russia cut us off from gas and in southern part we had droughts and that limited hydro production and nuclear production. So, neighbors were always able to help each other. We have calculated how much it’ll cost us to build out new transmission lines, not only offshore lines that will connect offshore wind farms with mainland, but also transmission lines between different member states. And then of course, our cities were not designed keeping in mind such a purpose that there will be charging stations for E-vehicles or heat pumps, electric heat pumps.

So, it will cost us hundreds of billions of euros. At the same time, only in 2022 European consumers and industry we paid 600 billion for fossil fuels that are imported from third countries. So, electrification makes sense economically, because despite the urgent need for investments right now, that allows us to cut our budget that we pay for our trading partners.

Jason Bordoff: But where will that money come from? If you look at the Draghi report, one of the headline takeaways was his recommendation of something like 800 billion euros a year and needs to be invested in industrial sectors, including energy in Europe, to be competitive. It was historic that in this country we passed the Inflation Reduction Act, which will be somewhere around a trillion dollars, estimates vary, but that’s over 10 years. I mean, this is a huge amount of money that Draghi recommended needs to be spent every year. Is that possible?

Kadri Simson: Yes, it is. And similarly, like in United States you do have Inflation Reduction Act. Europe responded to the COVID crisis back in 2020. And we agreed that there will be a top-up for our union budget, we called it recovery facility. And based on advice also that we received from international agency, this recovery package was also designed in such a way that 40% of the investments out of 700 billion had to be dedicated to NHN climate-related expenditure. Right now what we see that member states made their plans, and until now two thirds of their investments have been going to the NH sector. So, this was the urgency. In 2020 we didn’t knew then that it will be such a necessity. But two years later governments decided to use this money to upgrade Crete, but also to cut the energy demand that our building sector and heating needs represent. So, we call it innovation wave. The buildings that were built in ’70s, ’80s when we had no understanding about NH efficiency as We do have now, will receive lots of financing from EU funds to be renovated.

The other option for Crete development is of course tariff. So consumer bills, they consist from energy prices, tariffs, excises, levies, and the very moment when renewables to provide cheaper electricity prices, nothing to do, well, the tariff fees might be a little bit higher than they used to.

Jason Bordoff: To raise the revenue you mean for investment-

Kadri Simson: To pay back the loans that were taken to upgrade the Crete.

Jason Bordoff: His report also I think pointed out, if I remember correctly, that energy taxation can be an important source of revenue. But in any can encourage decarbonization. But there’s a lot of variation among member states. It’s higher in Europe than in the United States. And I was wondering whether he was suggesting that actually heavy taxation on the energy sector can be an economic disadvantage or competitive disadvantage. Is that a concern in Europe?

Kadri Simson: Well, this is what we have done so far, and actually, that gives leverage for governments at the times when oil prices are extremely high. Then our governments have the buffer and they can reduce taxes that American administration doesn’t have to do. With energy taxes we have this agreement in European Union that this is a sovereign decision by each and every member state. At EU level we cannot introduce new taxes, unless there is a unanimity. And so far it has been very difficult. Something that reminds taxes, but it’s not tax, is a tariff for [inaudible 00:23:38] connection. And this is where we tried to create a new scheme so that, for example, investments that transmission system operators will do to connect offshore wind farms will be not charged from the households, because the benefits are mainly going to the industrial consumers.

Jason Bordoff: I’m just curious your thoughts at a high level on how we should think about this broad, somewhat new frame of industrial policy, industrial strategy, the frame of competitiveness of security, particularly in the context of competition with China. If Europe has strong climate goals for 2030 and wants to deploy renewables as fast as possible, some people might argue, the cheaper the renewables the better. And the cheaper the electric vehicles the better. And if China makes them cheaper, that’s great. Obviously, there’s a lot of concern about the dominant role that China has in a lot of these supply chains. Is there a tension there between building domestic manufacturing and maintaining European competitiveness and what it might do to the cost of energy across the board, including clean energy? And how to deal with the national security concerns or geopolitical concerns people have about relations with Europe and China, the U.S. and China today, this new world of great power competition that we’re in?

Kadri Simson: Well, European Union is still the open market, so we don’t introduce any trade barriers. But saying that, we of course have to take care of the cybersecurity aspect of our creeds, for example. So for open tenders, there are other components important as well, not only price component. For example, the data security. And we have pre-qualification criteria for technology providers. And they cannot be the ones who have a obligation to ship data back to third countries. Because being them windmills or well, other devices, if there are thousands of them, they might create risks. If sensors are shipping data out from Europe. Our market is very attractive and we are also the ones who are willing to pay clean premium. At the same time just last year Europe championed a global pledge to triple renewables and double NH efficiency gains. And that means that by 2030 the global renewable market will triple as well. And this will be a trillion dollar market.

And of course, most of these countries who joined our pledge, altogether 132, they do expect that these will be advanced economies who will pay for this renewable acceleration also in their countries. And there we have to make sure that this is not ending up in the situation where we are paying. But the technology and industrial input will come only from one turbine and supplier.

Jason Bordoff: In addition to renewable electricity an important part of Europe’s Green Deal and climate decarbonization goals has been low carbon fuels. You’ve talked about green hydrogen, really ambitious targets for Europe around green hydrogen production and consumption. And I think it’s fair to say it’s been challenging. We just saw this week a planned pipeline between Norway and Germany got canceled, costs are high. It seems to me like with a lot of government support like the Inflation reduction Act and what Europe has done, there’s a lot of interest among companies to make green hydrogen. There might not be yet as much interest to buy it, because it’s expensive. And so, can you talk about where you see the hydrogen, low carbon hydrogen market, blue or green I suppose, and what else needs to be done? Is this harder than we thought it was? And what should government policy makers be doing to try to accelerate the transition for things like heavy industry and maybe other sectors?

Kadri Simson: In Europe our industry already consumes hydrogen. This is gray hydrogen produced with feedstock is natural gas. And we set a very ambitious target that by 2030 the existing consumption of 10 million tons of gray hydrogen has to be met with another 10 million tones of green hydrogen that European producers will produce. And of course, there was this chicken and egg question. The producers complained that they don’t find off-takers, and possible off-takers complained that there is no production to meet the volumes that green steel plants will need. And we addressed all three sectors, supply, transport and off-takers, demand. For suppliers, for electrolysers we launched support scheme under the European Hydrogen Bank. This is auction scheme where the best and most promising projects will get a grant that covers their green premium.

The first auction took place this year we had 132 applicants. We were able to choose only eight most promising ones. And we granted them 700 million euros and their responsibility is to bring online green hydrogen production by 2030. The second call will take place later this year. For transport, well, our ports are very active to find their ways how to create global partnerships on clean ammonia. For hydrogen valleys, we are investigating if it makes sense to retrofit existing gas pipelines so that they will be transporting in the very near future green hydrogen. This is cost-wise sensible action, but that means that natural gas has to be phased out from the economy. And off-takers as European polluters have to buy emission allowances. We collect money from polluters and then we gave them back funds to these industrial players who are willing to change their equipment and be able to replace conventional steel making with green alternatives for example. So we do have several factories coming online in Sweden. Northern Sweden is some very famous clean steel project that is right now the most advanced one.

Jason Bordoff: And on the topic of competitiveness, I mean, Europe did really some extraordinary things to reduce gas use in response to the crisis, conservation efficiency, more renewables. Some of it was just high prices destroying economic activity, which is what high prices do. And some of that has come back, but not all of it. I think industrial gas demand, as I said, is still around 20% below where it was before the crisis. And energy prices are not quite, but somewhere around two times what they were before, a little bit less than that. How do you think about competitiveness for European industrial sector? Is some of the industrial economic activity, demand destruction we’ve seen, is that permanent, or what would encourage companies to restart industrial activity, given the price of energy? And the volatility, as you said, Europe will be more connected to the LNG market moving forward, so that’s just a new element of uncertainty that didn’t quite exist before.

Kadri Simson: This will be top priority for the next few years. And President von der Leyen has made a promise that she will come out with clean industrial plan within her first 100 days. If her term starts in December, then you can expect that somewhere around inauguration of the U.S. President, Europe will respond with its own clean industrial plan. That makes it easier to start new businesses in Europe. Of course, our strength has always been that our market is very attractive. And we can set standards, what kind of goods will be traded in Europe. And it is always easier to produce them in Europe, because then you don’t face the situation that some kind of well, standards are not met or you don’t have certificates that allow you to trade with Europeans. So, this clean industrial plan for sure is created with aim to support our industry. And there are some industrial processes that are under heavy pressure also due to the Russian manipulation, for example, fertilizers.

Russia stopped its gas flows to Europe. That meant that they had no other alternative pipelines, no other alternative markets. And that left their fertilizing industry in the situation where gas was almost zero cost for them. And instead of selling us natural gas, they started to dump our markets with very cheap fertilizers.

Jason Bordoff: Yeah, yeah. Fertilizer imports have gone up, because it was hard to replace that production capacity.

Kadri Simson: It was just price-wise. Well, for Russian producers gas didn’t cost anything and for our producers it was extremely expensive. Logic was there and as we have not introduced sanctions on fertilizers, they were able to do so.

Jason Bordoff: Yeah, which presents its own potential security risks, right? The idea that your Russian gas imports have gone down, but if the stuff you need the gas for that’s pretty important for food security has gone up, that’s a whole different source of risk. And just you mentioned when Russia cut the gas to Europe, and just to be clear, it went down substantially. But it’s still about a third, just under a third, right? From 150 BCM to maybe around 45 today. So, there’s still, between pipeline and LNG, there’s still a meaningful amount, not nearly what was before Russian gas coming to Europe. I think Europe has a goal of getting to zero by 2030, if not sooner. Is it possible to get all the way to zero?

Kadri Simson: Our REPowerEU tells us that we will get rid of Russian fossil fuels as soon as possible, latest ’27. And indeed, we have introduced some measures already to cut the LNG import from Russia. So, we have given tools for national governments to restrict Russian LNG to access our own Crete gas pipelines. And then in our latest sanction package we also addressed trans shipments. Russia had this scheme that they brought to the LNG to our terminals and then used already bigger vessels to transport it, for example, to India. So these kind of activities-

Jason Bordoff: Would you mind if I asked-

Kadri Simson: … are restricted now.

Jason Bordoff: I mean, saying we will sanction reshipment, it’s fine to bring Russian LNG to Europe, but you can’t bring it to Europe to send elsewhere. Isn’t that like saying to other countries, “You shouldn’t be using Russian gas, but it’s okay that we keep doing it.”

Kadri Simson: Trans shipments just to mean that for Russia, the transport side of their trade will become more expensive. It doesn’t restrict them to continue take this India for-

Jason Bordoff: It’s sort of like the impact you had by banning Russian oil imports. Russia did sell the oil elsewhere. That ensured that prices didn’t spike globally for the whole world, but the transportation costs were higher and Russia was getting a little less per barrel by having to do that.

Kadri Simson: That’s what will happen. And I already mentioned that we have given our governments, and right now there are, well, countries like France and Spain and Belgium still the ones who are receiving Russian LNG. And this is not, well, necessary. Because LNG market is global market. They could replace this Russian LNG with international alternatives. And well, some governments have sent a very strong signal to their companies that this is not acceptable. And so, we do have only three remaining countries-

Jason Bordoff: Not acceptable to keep buying Russian LNG-

Kadri Simson: To keep buying Russian LNG, because it’s not necessary. Now, via pipeline we receive gas via two different routes. One of them is Ukraine. Ukraine signed this Russia transit agreement in the end of 2019 for five years, this will expire. And last week I was in Ukraine in Kiev. I had discussions with government and the energy minister and also I brought it up when I met with President Zelenskyy that we don’t ask Ukraine government to get engaged and to prolong this transit agreement. Because we have prepared ourselves for many years that this transit agreement will expire. And we have found for our landlocked countries alternative supply routes. This is not necessary, we have other alternatives. Saying that, of course companies who still do receive Russian gas, they enjoy the price range that was agreed before the war. So, it is competitive price that Russians can offer now.

Jason Bordoff: And for Europe or other countries that are looking to really eliminate dependence entirely on Russian gas, Russian LNG, hopefully some of that will happen through continued very strong growth in zero carbon energy and renewables. Some of it probably will need to be LNG from other sources, and just making sure there’s sufficient supply to prevent volatility in the market. Because of what we talked about earlier, Europe is more connected to the LNG market. And the U.S. has been an important source of that supply. I’m wondering if the recent action by the Biden administration to pause new permits for LNG exports, is that a concern in Europe? I was in Japan last week, definitely got asked about it. People are concerned or asking about, I shouldn’t say concerned, asking about the reliability of U.S. supply. Has that been a concern in Europe?

Kadri Simson: No, it is not because for us it is clear that this will not remove existing permits, and as such this will have an impact beyond 2030. And beyond 2030 we plan to decrease our gas consumption even further, so our gas market is shrinking. And on top of that there are many global players, for example, like Qatar who are bringing online new capacity. They will target it mainly to the Asian markets, but it has been also a very necessary exercise to coordinate our actions with Japan, for example. So, the very moment when they are able to replace some of the LNG consumption with nuclear, for example, that they plan to bring online, that also help us to stabilize global LNG markets.

Jason Bordoff: Yeah, I definitely saw in Japan last week, some of the attitudes around nuclear are gradually shifting since the horrible Fukushima disaster. They will never restart all the nuclear reactors they had before. But there is a desire among everyone running for the leadership position now to bring those back online, still local opposition, so it’s going to take work. I’m curious if the attitudes around nuclear energy in Europe are shifting as well. Given the recent crisis, given high energy prices, given the need for zero carbon electricity?

Kadri Simson: Like everywhere, also in Europe there is excitement around small modular reactors, and some European developers who have made promises to bring online their own technology in 2030s. But we do have also 100 nuclear reactors in European Union. Half of them are relatively old. They were built in ’70s and ’80s. That means that we need to, well invest a lot also to extend their life cycle. But this is sovereign right of every country to choose their energy mix. So, we have made collective commitment to become climate neutral. Nuclear helps, and if governments have chosen to well invest also into the nuclear facilities, they can do so. And approximately half of our member states are right now producing nuclear energy. Many more to consume nuclear energy, because our markets are interconnected. And even if you don’t have an own nuclear power plant, you might end up being the one who enjoys cheap nuclear energy in your grid.

Jason Bordoff: And especially with the projections now for more need for electricity with data centers and artificial intelligence, as well as electrifying heat or transport. Striking in the U.S., you probably saw the announcement that the Three Mile Island nuclear plant, which had been shut down and suffered this accident in 1979, is being brought back online by a big tech company. There’s not that many places that have a lot of nuclear plants sitting around waiting to be turned back on. There are in Japan, I guess Germany has some, and not to ask you to speak for the German government, but do you see attitude shifting in Germany around nuclear power or not so much?

Kadri Simson: Not so much. But while Germany is willing to investigate other options, for example, CCS, carbon capture and storage, which was a no go couple of years ago, but now this might be a solution how to extend gas fired power plants, their energy mix just by capturing them, release CO2. And there is a promising cooperation also with Norway where we go finance the pilot underwater storage site for Northern Lights. Carbon capture and storage has its momentum now. And when we announced that by 2040 we plan to cut our greenhouse gas emissions by 90%. Then two new elements on top of renewables and the nature efficiency where necessary. One of them was CCUS and another one was nuclear.

Jason Bordoff: You talked before about interconnectors and transmission. So, just I brought up artificial intelligence a moment ago. When we look at these projections now for how much electricity the world’s going to need. Talk a little bit about what you think needs to be done for grid modernization in Europe? Long wait times to build things and permit things. As is the case here in the United States, the grid assets are pretty old across most of Europe. What needs to happen going forward?

Kadri Simson: Indeed, the electricity consumption will increase significantly. And this was also one of the reasons why we proposed last year this tripling renewables proposal. Because only by bringing online 11 terawatts additional renewables, we will be able to avoid situation where our markets will need additional coal-fired power plants. This was the calculation behind these tripling renewables that we will avoid new fossil fuels. For us, the Crete development is a key, because we want to bring online solar and wind, and somehow we have to balance it. So, first priorities to smarten our Crete, so that demand response both from large industrial players but also millions of households can play its part. If something that other markets want to learn from us is there, then this is our electricity market design, for price signals really change the behavior of consumers, and by doing so allow us to save significantly from extra capacity.

So smartening our Cretes is a priority. And then connecting our markets, but not only 27 European member states, but we do have a massive projects also to connect Northern Africa, because they have great potential to produce solar. We do have a project to connect us underwater with Georgia and Azerbaijan where they do have Caspian Sea and great wind potential. But in Georgia they do have lots of hydropower. So, this is some 1,000 kilometers cable project under water. And right now the Black Sea region is difficult due to the ongoing war in Ukraine. But that is a fine example how our partner governments are interested to invest into renewables, but at the same time they also need access to the markets where the prices are attractive and predictable. And our prices and our markets are exactly that.

We presented last year Net-Zero Industry Act, where we announced the plan to start producing key clean tech components and technologies in Europe. Solar, wind, geothermal, SMRs when they are market-ready one day. But also create components. Because right now out of three major cable producers to our European companies, and we want to keep them in Europe. And of course, we have to provide them also access to the materials that are necessary for cables, but also for all the substations and other technologies that go along with Crete upgrades.

Jason Bordoff: You mentioned Ukraine a minute ago, and I feel badly I waited this long in the conversation to ask about this. Hopefully people listening have stuck with us, because I think it’s really important that people understand the situation in Ukraine. You’ve been a pretty passionate defender, supporter of Ukraine through this crisis. And you’ve been trying to ring the alarm bell in recent months about while Europe is in a comfortable position this winter, that’s not the situation in Ukraine, and Moldova probably as well. Just talk about what has happened to the energy infrastructure in Ukraine, what it might mean this winter for the people of Ukraine and what can be done about it by governments in Europe, the United States elsewhere to help?

Kadri Simson: We have set up energy community support fund to support Ukraine, especially where it is possible to repair the damaged energy infrastructure-

Jason Bordoff: Give people listening a sense of how significant that damage means and what does it actually mean when things get cold this winter?

Kadri Simson: Russia started to attack Ukraine and energy infrastructure already in autumn of 2022. And first they targeted substations. Which created regional blackouts and it was relatively difficult to find from global markets supply to replace these substations. But this year in 2024 they have changed their tactics and they have sent hundreds of drones and dozens of missiles to all the Ukrainian thermal power plants. So, they have destroyed, or they have made attempt to destroy the thermal power plants all across Ukraine, not only in the eastern part. On top of that they have also destroyed combined heat and power plants that provided district heating for biggest Ukrainian cities. And they have also targeted substations that are crucial to allow nuclear power plants to distribute their production to their grid. Now they have also started to target the substations that are necessary to provide external electricity to nuclear power plants.

So, despite the fact that they are not launching missiles directly against nuclear power plants that are still under Ukrainian control, they are already creating these kind of risky moments where nuclear power plants have to be shut down, because they have lack of electricity, external electricity. The latest major attack wave was in 26th of August. And on top of all the attacks they also targeted the hydro dam, Kyiv hydro dam. And this is a major water reservoir that is upstream from Kyiv. And if we do remember what happened when Russians destroyed Kakhovka Dam two years ago, then this kind of environmental and human disaster. Well, didn’t happen this time, but well, there was clear intention from Russian side. So, all together Ukraine has lost nine gigawatts of power generation capacity. Their peak demand in the wintertime is 19. So, half they have lost, and international tourist-

Jason Bordoff: Half of their peak-

Kadri Simson: Yes.

Jason Bordoff: … demand.

Kadri Simson: Half of the peak demand. Of course, they’re doing themselves miracles. So when in the August they had blackouts that lasted as long as 16 hours. Now last week when I was Kyiv, life is almost as normal as it could be. But it’s summertime. So, winter demand and cities without district heating will be miserable places. Cities without electricity will mean that there is no access to water, sewage doesn’t work. And all the consequences of these things will force people to move and leave their homes.

Jason Bordoff: And what’s being done, what can be done is it sending in teams to rebuild as fast as possible, sending as many diesel generators as possible, what can be done in the short timeframe?

Kadri Simson: We have shipped them mobile gas turbines that are necessary to, well, provide water and heat for cities. We also help them to rebuild some of the biggest thermal power plants. But the risk is that until the air defense is not in place, then these construction teams might be targets themselves. Because Russia tends to, well, relaunch the attacks, and we have to find out the means how to protect rebuilt power plants. Otherwise, it is a constant fight against the evil. And then of course, very important part of our support is the fact that since 2022 we connected Ukrainian and Moldova electricity grids to European ones. And that allows us to trade electricity. So European producers who have capacity to produce more than our markets’ need can support with their production also Ukrainian market. And this is right now happening at the level of 1.7 gigawatts, but we’re doing our utmost to increase the capacity so that additional electricity flows can support Ukraine in the wintertime.

Jason Bordoff: Yeah, this really is a potential humanitarian catastrophe. And thanks for the work you’ve been doing to help support Ukraine. We’re just about out of time, but I just wanted to end by asking, what’s next here, a few more months and then relax on a beach, write a book? What are you looking forward to when your term as commissioner comes to an end?

Kadri Simson: We do have very strict rules. Commissioners are obliged to cool down, and that means that there are only limited things that we can do. One of these is to find a motivating atmosphere in academia. So, I do have great expectations that I will find a nice academia while not here-

Jason Bordoff: I can validate a test that finding a home after government in academia can be a rewarding thing to do. Absolutely.

Kadri Simson: Exactly. So, it is always nice to cool down in an environment that is intellectually interesting.

Jason Bordoff: Well, I’m excited to see where you do that and look forward to staying engaged. And we did not cover nearly everything I even wanted to cover for the energy transition in the developing world, issues of critical minerals, a host of other things, but a lot to continue to work on, and hopefully look forward to collaborating in whatever you do next. And it’s been great spending time together and in your current role as commissioner. So, thank you for your service to the European Union. Thanks for making time to be with us today.

Kadri Simson: Thank you.

Jason Bordoff: Thank you again, Commissioner Simson. And thank you for listening to this week’s episode of Columbia Energy Exchange. The show is brought to you by the Center on Global Energy Policy at Columbia University School of International and Public Affairs. The show is hosted by me, Jason Bordoff and by Bill Loveless. The show is produced by Tim Peterson from Latitude Studios. Additional support from Martina Chow, Anne-Sophie Corbeau, Pierpaolo Cazzola, Lilly Lee, Victoria Prado, and Caroline Pitman. Sean Marquand engineered the show. For more information about the podcast or the Center on Global Energy Policy, please visit us online at energypolicy.columbia.edu, or follow us on social media, @ColumbiaUEnergy. And please, if you feel inclined, give us a rating on Apple Podcasts, it really helps us out. Thanks again for listening. We’ll see you next week.

Europe is facing a critical challenge. When it comes to advanced technology innovation, labor productivity, and affordable energy, it’s not keeping up with the U.S. and China. At least that’s the take from Mario Draghi, former European Central Bank president, in his European Commission report last month titled, “The Future of European Competitiveness.”

The last five years for the European Union have been tumultuous – from the pandemic to an energy crisis sparked by Russia’s invasion of Ukraine, to the European Green Deal. How Europe moves forward in the face of these challenges will directly impact its short and long-term energy security, and the pace of its transition to clean energy. And it’s all playing out against the backdrop of an ever-worsening climate crisis.

This week, host Jason Bordoff talks with Kadri Simson. Kadri has been the European Commissioner for Energy since 2019. Before that, she was the Estonian minister for economic affairs, and held various other positions in the Estonian government.

Kadri visited the Columbia campus during Climate Week in New York City.

They discussed the impact of Russia’s attacks on Ukraine’s energy infrastructure, Europe’s progress in weaning itself off Russian gas, and member states’ attitudes toward nuclear power, among other topics.

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