“Rarely is the question asked, is our children learning?” – George W. Bush
It has been a tumultuous few weeks in the energy sector. As the war in Ukraine drags on and winter approaches, the market for electricity in Europe experienced a historic blowoff top, triggering a series of panicked moves across European capitals. After peaking at nearly €1,000/MWh, German year-ahead electricity prices closed the week at €510/MWh, which is still 40% higher than prices were at the beginning of August and a full ten times their pre-crisis average. If this is the new normal, the new normal won’t be very pleasant.
As is natural in such circumstances, many have speculated that the top might be in, at least as it pertains to this phase of the crisis. Indeed, many global leaders are catching a glimpse into the abyss and recoiling, urgently reconnecting with physics in the hopes of minimizing the damage of prior mistakes. While the full impact of past decisions is undoubtedly a price yet to be paid – especially in Europe – there are hopeful signs that we are past peak stupidity in energy policy. Let’s dig in.