Will energy energy independence from Russia spur a shift to renewables?
The European Union seeks energy independence from Russia. Energy experts and the ECB say this will involve higher energy costs and some hardship
ATHENS, Greece - Russia’s invasion of Ukraine has triggered a European quest to lower dependence on Russian gas and transition to renewable energy, triumphing over Russian president Vladimir Putin and climate change simultaneously.
The European Commission believes it can replace 24 billion cubic metres (bcm) of Russian gas with zero-emissions renewable energy sources this year.
“Let’s dash into renewable energy at lightning speed,” said Frans Timmermans, Commission vice-president responsible for the European Green Deal – the EU’s energy transition masterplan backed by 270bn euros’ worth of bonds issued by Brussels.
Energy experts tell Al Jazeera the war could indeed catapault renewable energy to stratospheric levels and put Europe on track to meet its carbon emissions targets, but in the short term it could face electricity blackouts, factory shutdowns and capricious energy prices.
The International Energy Agency this month issued a 10-point plan to reduce Russian gas imports by 63bcm, approximately half of what Europe imported last year, through a mixture of diversification and economy. These measures could be enacted in the next year, the IEA says, without building new infrastructure.
A few days later, the European Commission topped that with an even more ambitious plan to reduce reliance on Russian gas by two thirds before Christmas, and abolish all Russian fossil fuels – including coal and oil – by 2030.
“We simply cannot rely on a supplier who explicitly threatens us,” said Commission president Ursula Von Der Leyen, unveiling the plan on March 8.
Can it be done?
Europe consumes about 495bcm of gas a year, and the Commission estimates Russia supplied 155bcm of it last year.
The IEA plan would reduce Russian gas use by 33bcm by asking Europeans to turn down their thermostats by 1˚C and increasing electricity generation from nuclear power and biofuels. It would replace another 30bcm of Russian gas with Liquefied Natural Gas (LNG) shipped from the United States, Caribbean and east Mediterranean. Total savings of Russian gas amount to 63bcm.
The European Commission’s REPowerEU plan would reduce gas use by just over 40bcm, by speeding up installation of solar panels and household economy. It would find an additional 10bcm of gas from non-Russian pipelines (from Norway, North Africa and Azerbaijan) and 50bcm from LNG. Total savings of Russian gas amount to 100bcm.
“This is a bedtime story,” says Costis Stambolis, who directs the Institute of Energy for Southeast Europe (IENE), a think tank. He estimates the world’s LNG producers only have about 20bcm of uncommitted capacity, and the EU can perhaps eke an additional 10bcm out of non-Russian pipelines. Even that won’t be easy, he believes, as competition for gas is at an all-time high.
“Things are going to get very ugly from now on, in prices and in clashes between countries,” he says.
On the other side of Europe, Prof. Jonathan Stern agrees the Commission estimates are optimistic. The Oxford Institute of Energy Studies, which he directs, conducted recent research suggesting Europe could perhaps find an additional 40bcm of LNG and non-Russian pipeline gas, but, he says, “we’re looking at 2-3 years before we get anything additionally substantial.”
The question therefore arises, he says, of “who is cutting off whom,” because Russia is already lowering deliveries to Europe.
The OIES analysis shows that average daily flows of Russian gas fell from 473 million cubic metres a day in 2017-2019 to 360 MMcm/d in the second half of last year. Russia’s troop buildup on Ukraine’s border started in mid-September, suggesting that limiting energy supplies to long-term contract obligations was a move co-ordinated with military manoeuvres.
A hostile Russian cutoff would leave Europe with 40% less gas than it needs, says the OIES report, predicting “industrial closures and power cuts.”
An additional problem, Stern believes, will be building the terminals to import LNG, which has to be pumped off ships into storage faciities.
The investments required to do that could derail, rather than reinforce, Europe’s green energy transition.
“You’re talking about multi-billion euro investments in long-term infrastructure that has to operate for 20 years before it pays back. How is that compatible with net zero targets? It’s not,” Stern says.
What will it cost?
Even before the invasion, the European Central Bank estimated that high energy costs would lower EU growth by 0.5%.
Energy prices surged more than 30% in February, driving inflation to 5.8% from from 5.1% in January.
“Energy prices… continue to be the main reason for this high rate of inflation and are also pushing up prices across many other sectors,” said ECB chief Christine Lagarde on March 10.
Despite high inflation, the ECB will continue purchasing government bonds until June and will leave interest rates low, foreseeing that governments will need liquidity to subsidise energy costs. For the same reason, Euro Area members will be able to avoid strict deficit and debt ceilings this year.
Greece last month proposed forming an EU energy fund to issue low-interest loans to member states. They would use these to subsidise consumers or wholesalers.
The IEA believes the money for such a subsidy can come from the Emissions Trading Scheme, Europe’s carbon market. It also believes EU members can tax an estimated 200bn euros in windfall profits fossil fuel companies stand to make due to high prices.
Should the Commission decide to fund LNG terminals and other infrastructure, a new euro bond, akin to the Recovery and Resilience Fund, might not be out of the question, driving costs further up.
Just as stepping up LNG imports could contradict the EU’s plans for a green transition, the subsidy idea could contradict its competitive market, says Stambolis.
“It took 15 years to set up electricity exchanges and gas trading hubs, and now they’re talking about diluting rules to soften high prices. This goes against EU law, and… many trading companies will sue the EC for weakening the competitive environment…This is another aspect of why things will get very very ugly.”
Is there a silver lining?
The silver lining may be that the 2022 energy crisis supercharges Europe’s drive towards renewables, which are more competitive than ever given high oil and gas prices.
“Perhaps good things are going to come out of this, not for Ukraine, not for Russia-Europe relations, but possibly for energy and environment,” says Stern.
“The best case [scenario] would be that we had retained Russian supplies but this had created a massive impetus to move towards renewables, batteries… and energy efficiency.”
In such a scenario, Russian long-term pipeline contracts would not be renewed. The controversial Nordstream II pipeline is in any case dead, Stern believes, because it’s “become a symbol of Russian oppression” and doesn’t bring more gas to Europe anyway. Since Russia is merely honouring long-term contracts, “all Nordstream II does is to take gas out of existing corridors – Ukraine and Belarus-Poland – and put it in Nordstream II.”
The European Union’s messaging is that Putin now represents 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,” said French energy minister Barbara Pompili on March 3, backing the IEA’s plan to reduce Russian gas dependence. “Collective responsibility in the way we use and consume energy is the best way to reduce our delendence on Russia. You can turn down the thermostat in your house,” she said.
Energy conservation and the green transition are arguably becoming an individual, patriotic duty for Europe, and Ukraine’s war is partly becoming an energy war.
IEA 10-point plan
· Europe can replace 30bcm of Russian gas with LNG and gas from sewage treatment
· 35TWh of electricity from renewables in addition to what is forecast over the next year, equivalent to 6bcm of gas
· 70TWh from bioenergy and nuclear over the next year, replacing 13bcm of gas
· Speeding up replacement of boilers with heat pumps replaces 2bcm of gas
· Improving energy efficiency of buildings replaces 2bcm of gas
· Lowering thermostats by 1˚ reduces consumption by 10bcm
· Total gas economy and replacement of Russian gas from these measures is 63bcm
European Commission REPowerEU Plan
· 50bcm of Russian gas replaced by LNG
· 10bcm more gas from non-Russian pipelines
· 3.5bcm of gas from increased biomethane production (gutter gas)
· 14bcm less gas consumption if EU consumers turn down their thermostats by 1˚C
· 2.5bcm of gas replaced by front-loading solar power on rooftops in a year
· 1.5bcm of gas replaced by front-loading heat pump deployment in a year
· 20bcm of gas replaced by front-loading industrial deployment of solar panels
· Total gas economy and replacement of Russian gas from these measures is just over 100bcm
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