Underneath the glass and wrought iron ceiling of Antwerp’s stock exchange last month, French President Emmanuel Macron addressed a hall full of executives from heavy industries. He wasted no time in diving into the issue everyone cared most about: Europe’s perennially high energy prices.It is, he said bluntly, “a weakness.”Even before the war in Iran pushed up oil and gas prices and disrupted supplies of key fossil fuels across the globe, energy was a major concern in Europe, where power prices are far higher than in the US and China. Plants have been shut down as costs made them uneconomical, there have been repeated complaints from corporate giants like BASF SE and industries such as steelmaking, and politicians have fretted about how their economic ambitions for the region risk being undone by the problem.The fallout from Middle East conflict is upping the pressure to act. This week, gas prices in Europe rose to the highest in three years. The spike probably added at least €1.3bn ($1.5bn) to the continent’s energy costs, according to calculations by Strategic Perspectives, a climate think tank.Though levels are well shy of the peak seen after Russia’s full-scale invasion of Ukraine, the latest moves come amid an increasing drumbeat of calls to cut prices.“This is really happening at the wrong time — we are very exposed to the global energy market, both in terms of prices and in terms of volume,” said Anne-Sophie Corbeau, research scholar at the Center on Global Energy Policy in Paris. “Industry is going to be thinking, ‘oh no, not another crisis.’ There aren’t any magical solutions.”It’s fueling a frantic rush for action. Proposals have ranged from scrapping taxes to ditching costly climate policies, yet critics say that jeopardizes Europe’s ability lower energy costs in the longer term by building out renewables.In Brussels, the scale of the concern is clear. At one meeting this week, senior EU officials warned member states that the Iran war shows that solving energy is “existential” for the bloc, according to a person familiar with the matter.Leaders are set to hold a summit on March 19, when they will direct the European Commission to propose ways to cut prices and help industries.One look at the decisions being made in corporate offices bears out the worries. The squeeze from energy costs is reshaping the industrial landscape, pushing companies to slow investment, shelve decarbonization projects and shift capacity elsewhere.Versalis, the chemicals unit of Eni, is closing plants, highlighting how energy-intensive industries are reassessing whether Europe remains a competitive place to operate.BASF Chief Executive Markus Kamieth has said that Europe “is losing industrial capacity at a speed we have never seen before.”The EU finds itself at a critical juncture. Not only is it fighting to save industries, boost competitiveness and keep up with the AI revolution — which will require power-hungry data centers — it’s also trying to boost its defense capabilities.To meet those objectives, it will require vast amounts of energy in the coming years. Right now, it’s far from clear whether it will have enough, and at a cheap enough price.BloombergNEF sees a 57% rise in final power demand by the end of the decade from 2024 levels, with the bulk of that being from EVs, followed by data centers. The European Commission’s projections are of a similar scale, and AI’s thirst for power means those analyses could soon be out of date.After the Russian energy crisis of 2022, what’s happening now is a stark reminder that Europe can’t afford to relax when it comes to the cost – and availability - of energy.Europe has largely turned to seaborne liquefied natural gas to replace Russian supplies, leaving it exposed to international gas markets. Both costs and competition for fuel has increased after a major Qatari LNG facility was targeted in an Iranian drone attack.Just a few days after the Macron addressed the Antwerp Industry Summit, world leaders, military chiefs and business leaders gathered for the Munich Security Conference. Amid the now-familiar calls to boost defense spending, it was the topic of energy that lingered in many of the conversations.The European Parliament has noted that the defense industry is “increasingly energy intensive.” It cites the need to manufacture equipment like missiles and armored vehicles, and power the systems and networks that underpin modern warfare, such as drones and cyber systems.The squeeze from energy prices is far from a new issue. In a high-profile 2024 report on European competitiveness, former ECB President Mario Draghi noted the negative impact on the economy.They are an “obstacle to growth” and “affect corporate investment sentiment much more than in other major economies,” his report said.The problem is that much of the EU strategy relies on rapidly scaling up renewables, banking on the negligible operating costs of exploiting wind and solar power.Some industry analysts say Europe’s green ambitions are far-fetched, especially given the expected electricity needs of data centers and the computational power needed for AI services.“If we’ve had problems with our electricity and our energy system today, the scale of that will increase massively with the full-scale production of AI in the European Union,” Ebba Busch, Sweden’s energy minister, said last month. “If we don’t get this right, there will be an A and B team when it comes to artificial intelligence.”In the search for a quick fix, some now want to put the brakes on the climate transition. Italy’s government has called on the EU to suspend its Emissions Trading System, which puts a price on each metric tonne of CO2 into the atmosphere.“There’s been a massive wave of fossil fuel nostalgia in Brussels,” said Thomas Pellerin-Carlin, a Socialist lawmaker in the European Parliament. “The only way for us to achieve energy security is to get out of fossil fuels. We need to understand it’s the road to serfdom, otherwise.”
