Russia’s invasion of Ukraine sparked a European quest to reduce dependence on Russian gas and move closer to renewables – with a simultaneous triumph over Russian President Vladimir Putin and climate change.
The European Commission estimates that it can replace 24 billion cubic meters (bcm) of Russian gas with zero-emission renewable energy sources this year.
“Let’s dive into renewables at lightning speed,” said Frans Timmermans, Vice-President of the European Commission (EC) responsible for the European Green Deal – the EU’s energy transition master plan backed by 270 billion euros ($296 billion) of bonds issued by Brussels.
Energy experts have told Al Jazeera that the war could indeed catapult renewables to stratospheric levels and put Europe on track to meet its carbon emissions targets, but in the short term it could lead to blackouts, factory closures and capricious energy prices.
The International Energy Agency (IEA) released a 10-point plan this month to cut Russian gas imports by 63 billion cubic meters, about half of what Europe imported l last year, thanks to a mix of diversification and savings. The organization says these measures could be enacted next year, without building new infrastructure.
Days after the IEA statement, the European Commission announced an even more ambitious plan to cut Russian gas dependence by two-thirds before Christmas and to abolish all Russian fossil fuels – including coal and oil – by 2030.
“We simply cannot rely on a supplier that explicitly threatens us,” EC President Ursula von der Leyen said as she unveiled the plan on March 8.
Can it be done?
Europe consumes about 495 billion m3 of gas per year, and the EC estimates that Russia supplied 155 billion last year.
The IEA plan would reduce Russian gas consumption by 33 billion cubic meters by asking Europeans to lower their thermostats by 1 degree Celsius (33.8 Fahrenheit) and increasing electricity production from energy nuclear and biofuels.
It would replace an additional 30 billion cubic meters of Russian gas with liquefied natural gas (LNG) shipped from the United States, the Caribbean and the eastern Mediterranean. Total Russian gas savings amount to 63 billion cubic meters.
The European Commission’s REPowerEU plan would reduce gas consumption by just over 40 billion cubic meters, accelerating the installation of solar panels and the economy of households. It would find an additional 10 bcm of gas from non-Russian pipelines (from Norway, North Africa and Azerbaijan) and 50 bcm of LNG. The total savings of Russian gas in this regard amount to 100 billion cubic meters.
But according to Costis Stambolis, who heads the Institute of Energy for South Eastern Europe (IENE), a think tank, such hopes are akin to “a bedtime story”.
He estimates that global LNG producers only have about 20 billion cubic meters of uncommitted capacity, and that the European Union can squeeze another 10 billion cubic meters from non-Russian pipelines. And even that wouldn’t be easy, he said, because competition for gas is at an all-time high.
“Things are going to get very ugly from now on, in prize money and in clashes between countries,” he told Al Jazeera.
On the other side of Europe, Professor Jonathan Stern agrees that the EC estimates are optimistic.
The Oxford Institute of Energy Studies, which he heads, has conducted recent research suggesting that Europe may be able to find an additional 40 billion cubic meters of non-Russian LNG and pipeline, but, he said , “we wait 2-3 years before getting anything”. more substantial.
The question therefore arises, he explained, of “who is cutting whom”, because Russia is already reducing its deliveries to Europe.
OIE analysis shows average daily flows of Russian gas fell from 473 million cubic meters per day in 2017-2019 to 360 MMcm/d in the second half of last year.
The build-up of Russian troops on the Ukrainian border accelerated in mid-September, suggesting that limiting energy supplies to long-term contractual obligations was a coordinated move with military maneuvers.
A hostile Russian shutdown would leave Europe with 40% less gas than it needs, according to the OIE report, predicting “industrial shutdowns and power cuts”.
An additional problem, Stern believes, will be the construction of terminals to import LNG, which must be pumped from ships to storage facilities.
The investments needed to achieve this could derail, rather than reinforce, Europe’s green energy transition.
“You are talking about multi-billion euro investments in long-term infrastructure that must operate for 20 years before being amortized. How is this compatible with net zero goals? It’s not,” Stern said.
How much will it cost?
Even before the invasion, the European Central Bank (ECB) estimated that high energy costs would reduce EU growth by 0.5%.
Energy prices jumped more than 30% in February, pushing inflation up to 5.8% from 5.1% in January.
“Energy prices…continue to be the main reason for this high rate of inflation and are also driving up prices in many other sectors,” ECB chief Christine Lagarde said on March 10.
Despite high inflation, the ECB will continue to buy government bonds until June and keep interest rates low, anticipating that governments will need cash to subsidize energy costs. For the same reason, eurozone members will be able to avoid strict deficit and debt ceilings this year.
Greece proposed last month to set up a European energy fund to issue low-interest loans to member states. They would use them to subsidize consumers or wholesalers.
The IEA thinks the money for such a subsidy can come from the emissions trading system, the European carbon market. He also estimates that EU members can tax around 200 billion euros in windfall profits that fossil fuel companies could make due to high prices.
If the EC decides to fund LNG terminals and other infrastructure, a new euro bond, similar to the Recovery and Resilience Fund, might not be out of the question, driving up costs even further.
Just as ramping up LNG imports could contradict the EU’s plans for a green transition, the subsidy idea could contradict its competitive market, Stambolis said.
“It took 15 years to set up power exchanges and gas trading platforms, and now there is talk of diluting the rules to mitigate high prices. It’s against EU law, and…many trading companies will sue the EC for weakening the competitive environment…That’s another aspect of why things are going to get very, very ugly.
Is there a silver lining?
Perhaps the silver lining is that the 2022 energy crisis is energizing Europe’s push towards renewables, which are more competitive than ever given high oil and gas prices.
“Maybe good things will come out of this, not for Ukraine, not for Russia-Europe relations, but maybe for energy and the environment,” Stern said.
“The best case [scenario] would be that we had kept Russian supplies, but it created a massive push to move to renewables, batteries… and energy efficiency.
In such a scenario, Russian long-term gas pipeline contracts would not be renewed.
The controversial Nordstream II gas pipeline is dead anyway, Stern believes, because it has “become a symbol of Russian oppression” and is not bringing more gas to Europe anyway.
Since Russia is only honoring long-term contracts, “all Nordstream II does is take gas out of existing corridors – Ukraine and Belarus-Poland – and put it into Nordstream II.”
The message from the European Union is that Putin now poses both a security threat and an environmental threat to the world.
“It is vain to believe that a war on the continent will have no impact on us,” French Energy Minister Barbara Pompili said on March 3, supporting the IEA’s plan to reduce gas dependence. of Russia.
“Collective responsibility in the way we use and consume energy is the best way to reduce our dependence on Russia. You can turn down the thermostat in your house,” she said.
Energy conservation and the green transition are arguably becoming an individual and patriotic duty for Europe, and Ukraine’s war is becoming part of an energy war.