Wind Fuels Gas

Following Russia's invasion of Georgia, a vital link between Europe and the energy resources of Central Asia, energy security is back at the top of Europe's agenda. For years now, many Europeans thought that a major part of their future energy security might come from wind turbines and solar panels. Industry, too, has suggested that this may be the case: At this summer's World Petroleum Congress in Madrid, most major oil and gas companies presented new plans for big renewable energy projects. But this renewables push, particularly when it comes to wind, is probably just a very clever short-term business strategy that will not improve Europe's geopolitical situation.

Wind turbines generate electricity very irregularly, because the wind itself is inconsistent. Therefore wind turbines always need backup power from fossil fuels to keep the electricity grid in balance. Gas turbines are the best way to do this. They are able to respond quickly and push power production when wind generators stop suddenly. They can be turned on and off almost instantly, whereas traditional coal-fired plants need to be maintained in a very inefficient standby mode if they are to respond to large fluctuations in power demand.

A proliferation of windmills, then, can become a windfall for gas sellers. Just look at the cases of Spain and Germany, Europe's leading producers of wind power.

By the end of 2007 Spain had 14,700 megawatts (MW) of installed wind capacity, according to Enagás, which manages the national gas network, producing 8.7% of the country's total power supplies. Most of these wind generators are located in scarcely populated areas, while the power consumption is concentrated in big cities with their many air-conditioned buildings. The peak load of the Spanish power grid is thus in the hot summer months—but this is precisely the time of year when there usually isn't much wind.

For this reason, more and more gas turbines are being installed near consumers in the suburbs of Spain's cities. Only last year, Spanish power providers added 6,400 MW of gas-turbine power capacity, taking the total installed capacity of gas turbines to 21,000 MW. Natural gas has become the main source of electricity generation in Spain, and according to Enagás, 99.8% of the gas used in Spain is imported. Most of this comes via pipeline from Algeria, but the import of liquid natural gas (LNG) by ships will increase.

In Germany, more than 20,000 wind turbines with a total capacity of 21,400 MW are now "embellishing" landscapes. Wind power's share of total electricity generation has risen in line with that of natural gas since 1990. Germany's gas consumption for power generation more than doubled between 1990 and 2007, and now represents 11.7% of the country's total power generation. The country imported 83% of its natural gas supplies.

Today part of the wind power backup in Germany is still done by old coal-fired plants. But the Greens and even parts of the governing Christian and Social Democratic parties are fervently opposed to the construction of new coal plants. So many old power stations will probably be replaced by gas turbines. The green opponents of new coal-fired plants are nowadays the most dependable allies of the big gas companies such as Gazprom, Shell or BP.

Most European countries force consumers to subsidize electricity from wind power. This makes "renewables" a very safe investment compared with other energy businesses, where swings in commodity prices can be large. As Europe's big integrated oil and gas companies—such as Shell, BP and Total—invest more and more in LNG, they are also lobbying hard for a world-wide carbon-emissions trading system that would further increase the advantage of gas over coal.

In the U.S. the same thing is happening. The problem for the natural gas industry in the U.S. is that gas is still relatively inexpensive compared with market prices elsewhere in the world. There are no facilities for LNG export. This may explain why Shell, BP, Chevron and T. Boone Pickens are investing in wind power. It's a clever strategy to add value to their gas assets by boosting demand.

These gas players can afford to lose money on wind power in the short term to reap huge profits in the long term. In fact, this was the strategy first implemented by Ken Lay of Enron in 1990s. Enron was the power and gas company that started the first large-scale manufacturing of wind power in the U.S. It also brought up the ideas for a cap-and-trade system, to increase the competitive edge of gas over coal.

Wind power is clearly not reducing the dependence on imported fuel, contrary to the frequent claims of its proponents. In fact the experience from Germany and Spain shows that it is increasing the dependence of imported natural gas. And that's not energy security.