Last Friday, Fatih Birol, Christine Lagarde, and Werner Hoyer opened the first ever joint conference of the International Energy Agency (IEA), European Central Bank and European Investment Bank (EIB), by laying out the intellectual justification for an EU alternative to the US Inflation Reduction Act (IRA), and similar incentive regimes in China, Japan and India. Two clear themes emerged: that the energy transition must enable household prosperity and industrial competitiveness and that Europe must find its place in a changing and complex global energy landscape. Hoyer bemoaned “skyrocketing” household energy costs, while Birol explained that industrial natural gas prices are 5x those of the US, and electricity prices are 3x those of China. Lagarde argued that resolving the challenges of the energy transition is essential to contain inflation. If Europe gets the transition wrong, there will be high social costs, potentially leading to a backlash.

So what, do they argue, should be done?

Many of the solutions offered are sensible and uncontroversial. Stable energy policy is key to incentivise industry and mobilise capital. They argued Europe has all too often lost an early lead in green technologies, and that this conference gives an opportunity to map a strategy for the European energy transition. While Europe cannot compete in all clean energy technologies, Heyer explained that many of the essential technologies to deliver the energy transition do not yet exist, and Birol argued that new technologies are areas where Europe could have a competitive edge.

This is clearly a basis for a sensible and competitive European clean energy policy. Nevertheless, there are two risks that must be avoided.

Europe should avoid picking winners among technologies. While Birol is right that Europe should focus on the technologies of the future, the best outcomes for both the climate and the European consumer will be achieved when policy defines the problem and then allows potential solutions to the problem to compete to solve it. This technology agnostic approach will enable Europe to benefit from the most effective, and most cost effective technology innovation.

In order to deliver affordable and reliable energy to consumers, Europe must not take the electricity system for granted. While renewables generate electricity more cheaply than fossil fuels, this benefit clearly is not reaching the consumer. Indeed, Hoyer moves directly from skyrocketing energy costs to the low cost of solar generation without explaining the gap. As my colleague, Ryan Williams explains, the gap is explained by the rising cost of balancing an electricity system with renewable energy. New technology that enables a self-stabilising grid is necessary to ensure energy security, reverse energy price inflation, enable green jobs, and unlock the electrification of heat and transport at scale. Europe will fail in its clean energy aims if it takes the grid for granted.