The EU Breakup Most People Don’t See Coming

There’s no free lunch when it comes to energy, and some EU members are starting to learn that lesson the hard way. 

But this lesson didn’t start in worry and concern.

No, it started with hope. 

A decade ago, while the green energy transition was in full swing across the pond in Europe, a new connection was forged between two countries that many hoped would be a shining beacon could help share clean power between EU members. 

Not many people have heard of the Skagerrak 4 interconnection before. It was a high-voltage HVDC cable that went into operation in 2014 and connected Norway and Denmark to help build a more environmentally-friendly power market with Europe. 

And why wouldn’t they want to share their clean energy with their neighbors? 

After all, despite being the world’s 13th largest oil producer with output of roughly 2 million barrels per day, Norway’s energy dynamic is as clean as they come these days. The country gets 89% of its electricity from hydropower, with another 10% coming from wind power. 

Norway’s reliance on fossil fuels like oil is so trivial, it would make any member of the IEA blush.

Norway actually set up its first power interconnector with Sweden back in the 1960s. 

Today, Norway can export its clean power to several countries via five international interconnectors; the country’s power can be exported to Denmark, Netherlands, Germany, the United Kingdom, and Russia. 

All I can say is, “Be careful what you wish for.”

Look, we’ve cataloged Europe’s aggressive transition to renewables for many years here in our investment community. 

Don’t get me wrong, in certain places it makes perfect sense. 

In Norway, the clean power it generates allows it to export its crude oil to other countries, even if it is a relatively small share of global supply. The country also happens to be the fourth largest natural gas exporter in the world, shipping its gas to the EU and U.K.

You’re probably starting to wonder where things can possibly go wrong, right? 

Well, let’s put the pieces together and see where the trouble lies…

As you might expect, certain weather events in Europe like the Dunkleflaute can be a bit of a problem when it comes to energy sources like wind. It turns out that the “dark lull” was one reason why electricity prices started soaring in Europe. 

For Norwegians, that means — despite supplying virtually ALL of your electricity domestically from clean sources — you have to watch your electricity prices climber higher and higher as your clean energy is sent abroad. 

Believe me, it got pretty bad. Imagine watching your electricity prices surge more than 20 times the normal rate last week due to low wind generation in Germany and the North Sea, as well as a colder-than-expected start to winter. 

Oh, not only did they sit up and take notice, perhaps even feeling a bit of remorse, but now Norway is considering cutting off some of its energy ties. 

And at the heart of this debate are two power interconnectors with Denmark that may be shut-off if high electricity prices persist. 

The backlash is building, and it may not end well for the European mainland if Norway does decide to nix the Skagerrak interconnectors in 2026. 

I won’t be the first to throw stones, but in case it does happen, I guarantee you that some EU members will be desperate for cheaper energy. 

Over the next few weeks, I’ll show you exactly where they’ll look to find it. 

Stay tuned.