Are we insane?
On our self‑inflicted energy disaster
⚡ TL;DR
(For those of us whose schedule eats first, asks questions later.)
Europe’s high energy costs, stalled projects, and shrinking industrial base are the predictable result of ignoring basic engineering realities. Fixing the bottlenecks requires becoming a continent that rewards building again - starting with clear price signals and stable rules.
You can ignore engineering, but not consequences.
Antwerp, earlier this month, made that painfully obvious.
Two full years after Draghi and Letta’s compelling reports, most of what that EU’s leadership has been able to muster is a handful of threadbare phrases: “wake‑up call”, “we must”, “we need to”, “we should”, “last chance to save Europe”.
We have mostly ignored this check‑engine light, and now we’re acting shocked when the engine seizes at 120 km/h. If there’s an iron rule here (we owe it to an Hegelian habit of ideas over realities), it’s that this continent only changes course after hitting the wall.
This is now the wall.
For nearly two decades, our industrial core has been bleeding out. Energy became expensive, unreliable, and buried under top‑down management - regulatory theater stacked by people who never have to keep a grid running.
Firms that need power the most (steel, chemicals, heavy manufacturing) are reading the writing on the wall and are leaving.
By mid‑century, we face a fork in the road.
One path is managed decline: politics will become more and more obsessed with the present at the expense of the future (in Italy, we wrote the manual on this). All talent will drift toward places with a pulse and welfare systems will collapse under their own weight.
🪛 The other path is adult recommitment: recalling what we were when we mattered - not a dusty museum continent with excellent pastries, but a place that built things; that treated energy as the bedrock of civilization, not an environmental liability; that treated knowledge as an open frontier, not something to preserve in amber.
Which way do we choose?
(RE)LEARNING TO CHOOSE
We love strategies that promise everything at once.
Full decarbonization, low power prices, strategic autonomy, zero friction - and then we wonder why projects stall and investors hesitate.
A big part of the problem: rule‑makers now multiply faster than value‑makers.
Instead of building industries, we built bureaucracies. We minted a new ruling class that doesn’t produce anything; it supervises, coordinates, audits, and rubber‑stamps.
We built an economy around permission instead of production.
Bureaucracy compounds. It breeds more of itself. Trust a Sicilian on this - once the machine expands, it does not stop. Regulators justify their existence by inventing new things to regulate; departments protect budgets by ballooning their mandates.
“The security of power is based on the insecurity of the citizens.”
- Leonardo Sciascia
The result:
✅ Compliance becomes the center of gravity. Leadership time, capital, and creativity get sucked into paperwork instead of progress, to the point that the European Commission estimates that businesses burn €180 billion/year just to comply with rules.
⚖️ Trade‑offs blur. We keep stitching together incompatible aims - lower prices, higher regulation, faster builds, slower permitting - and call the result “ambitious policy”. In truth, it’s a refusal to choose. And when governments refuse to choose, markets and industry make the choice for them.
If you lock in higher energy costs while expecting a surge in energy‑intensive manufacturing, something breaks. If you aim for supply‑chain sovereignty while making inputs pricier and permitting slower, production gets less efficient while consumers pay more. Brussels talks simplification while the rulebook thickens - which firms translate as: “Do more with less oxygen”.
If we want a future, we have to do the grown‑up thing: choose. Prioritize. Accept trade‑offs. Put human flourishing and productive capacity first - and align energy, permitting, and capital around building again.
3 THINGS WE KEEP GETTING WRONG
We keep managing energy the way we handle everything in crisis‑mode Europe:
emergency politics,
muddled priorities, and
a deep, almost theological mistrust of markets.
Instead of designing systems that work, we try to micromanage outcomes.
As we’ve mentioned last Friday, the Italian Decreto Energia is the perfect specimen of this impulse 👇
By trying to fix the market through improvisation, this approach ends up distorting price formation and injecting legal uncertainty.
If you want to get into the weeds of 🇮🇹, Carlo Stagnaro dissected this brilliantly in a thread on 𝕏. Truly worth reading, as it shows how well‑intentioned tweaks mutate into structural distortions the moment they hit reality:
Here are the 3 fallacies that mirror the broader pattern Antwerp exposed: the habits that, in my view, keep Europe missing the mark.
1️⃣ We confuse intervention with strategy
Our default reflex is to slap quick, top‑down fixes onto an energy system already running on brittle foundations. Instead of confronting actual bottlenecks (e.g., slow permitting, rigid regulation, lack of flexibility), we reach for political shortcuts and then call them “policy”.
The thing is every emergency tweak erodes the incentives investors rely on: if rules change every few months, or retroactively, capital simply goes elsewhere.
📊 That’s why the IEA puts the 🇪🇺 grid investment gap at €66–80 billion/year needed vs €40 billion actual, with regulatory uncertainty and permitting delays cited as key deterrents.
Money flees to places with stable rules, not press conferences.
2️⃣ We distort price formation and hope nothing breaks
Rather than letting markets reveal where scarcity, value, and flexibility actually lie, we keep rewriting price signal by hand: e.g., reshuffling incentives for top-down hand-picked technologies, shifting gas‑transport costs onto electricity bills, and sprinkling selective rebates wherever politics demands it.
This might feel productive in the short term, but it sabotages the only compass the system has. Break the price signal, and you break the market.
📊 Data on this is clear: an IMF/IEA‑aligned analysis shows that post‑2022 interventions (e.g., Iberian “tope al precio”, or gas price cap) led to 73% of electricity price forecast error variance from cross‑border spillovers, with price caps increasing average costs.
3️⃣ We treat patchwork fixes as coherent design
Energy policy keeps trying to pursue ten incompatible objectives at the same time (lowering bills, steering investment, protecting incumbents, managing supply chains) using tools that contradict one another.
A thicket of piecemeal measures with no structural backbone. The (alas, predictable) outcome is that producers can’t plan and consumers can’t wrap their heads around the rules.
📊 IEA's World Energy Outlook and policy reviews note that the EU pushed out over 1,300 new energy‑related legal acts in the 2020–2025 mandate (before counting national add‑ons!) creating a regulatory flood that makes real planning impossible. In practice, producers don’t face a framework; they face 10–20 overlapping schemes per country, from subsidies to levies to caps, all pulling in different directions.
3 WAYS TO GET THEM RIGHT
It comes down to amplifying signal and reducing uncertainty.
Everything else is just more-of-the-same firefighting by decree.
1️⃣ Restore clean, credible price signals
Energy systems run on incentives, not intentions. When governments manipulate wholesale prices, cap scarcity, or hide costs inside tariffs, they blind the market to where flexibility, firm capacity, and new investment are actually needed.
Energy abundance requires accurate signals, because such signals tell entrepreneurs where to build, when to store, and how to invest in reliability.
Support vulnerable consumers, yes - but do it outside the price‑formation mechanism. Shield people, not the price signal. A clear signal is the compass for building a stable, low‑cost, high‑reliability system.
2️⃣ Replace ad‑hoc fixes with stable market design
Energy systems have long lifecycles; assets last decades.
If the rulebook changes every quarter, investors stay away. We want higher renewable penetration? Then rules stability is the minimum requirement for financing storage, flexible generation, and transmission.
We can’t build an industrial civilization on policy improvisation.
You need durable, tech‑neutral rules, no retroactive surprises, predictable permitting, and competition‑enhancing reforms. With coherence, capital flows in. Without it, no one builds anything.
3️⃣ Target structural bottlenecks, not symptoms
High bills aren’t the problem.
They’re the symptom of deeper failures: slow permitting, underbuilt grids, insufficient flexibility, and retail markets still shaped by legacy protections.
No amount of subsidies or rebates can correct that.
If we want lower prices, we have to increase supply and unlock innovation, not hide scarcity behind political fog. That means: fixing permitting so projects actually get built in reasonable time, expanding transmission so cheap power can flow, creating real flexibility markets, opening grid data so new solutions can emerge quickly.
When we’ll solve the bottlenecks, prices fall because abundance rises - not because regulators temporarily force them down.
Europe doesn’t need another plan - it needs to choose.
Progress will begin the moment we stop Brusseling: reward building, trust markets, and matching policy to engineering reality. It really is that simple.
🧰 TOOLBOX
Ridley M., How Innovation Works, Fourth Estate, 2021
Smil V., Invention and Innovation: A Brief History of Hype and Failure, The MIT Press, 2024
🙏 Glad to have you along for another edition of The Nuts and Bolts!
If this sparked a thought or two, share it with a friend! Or, give a quick tap on the ❤️ button to surface it to more curious readers on Substack.
See you on Friday.