As the EU scrambles to reduce their dependence on Russian oil and gas, many are concerned it could threaten the green energy transition. But while the conflict could increase near-term emissions, in the long run, it may accelerate the green
Vladimir Putin’s unjustified and brutal war in Ukraine has sent shockwaves across Europe and the globe. The conflict has already killed thousands, including hundreds of civilians (although the true number is likely to be far higher),
displaced over three million people, and unleashed untold human suffering across Ukraine.
Recent weeks have rapidly ushered in new political realities, with many governments overturning decades-old policies. Some of the most extreme policy shifts have occurred within the energy sector, unsurprising, given Russia is the world’s
largest exporter of natural gas and the second-largest exporter of crude oil.
So, while the policy and media focus should undoubtedly be on the humanitarian disaster unfolding in Ukraine, it is worth considering the broader implications of the war on EU energy policies.
Russia’s war on Ukraine is very fast-moving, with different sanctions or policies being announced almost every day in attempts to derail the invasion. At the time of writing, US President Biden has banned oil imports with immediate effect,
while the UK aims to eliminate any imports by 2023. But fearing energy shortages and significant economic damage, the EU has stopped short of any ban, rather aiming to reduce imports of Russian oil and gas by two-thirds by the end of the
The EU is heavily dependent on Russian oil and gas; with 25% of crude oil and 40% of natural gas imported from Russia. This reliance renders an immediate outright ban unfeasible, meaning the current timeline is for all Russian energy to be
eliminated by 2030.
In order to meet their two-thirds reduction target by 2023, the EU has pledged to use a combination of short term
measures; a third of Russian energy will be replaced using imports of liquid natural gas (LNG) from alternative countries (a potential source being Qatar),
while the remaining third will be eliminated by boosting renewable energy generation and reducing consumer demand (EU residents have been asked to turn thermostats down by 1°C).
More significant, is what the long-term repercussions in terms of energy policy will be. Will the shortfall be met by increasing renewable capacity? Will there be a reliance on long term LNG imports from alternative sources? Will there be
widespread nuclear generation? Or will the EU potentially look to burning coal for longer?
These are the questions energy analysts are desperate to answer.
Initially, it seems likely that coal usage will remain higher than expected across Europe over the next few years. Even before the onset of war, coal was enjoying a resurgence, as post-pandemic recovery led to higher energy demands. In
Europe, coal generation rose by 18% in 2021, the first increase in almost a decade.
A reduction in Russian energy imports will only exacerbate the scramble for energy, which will also lead to further increases in wholesale energy prices. Oil recently reached a price of $139 a barrel, the highest level for 14 years, while
gas reached a record $335 per megawatt-hours. At that price, it is cheaper for some power stations to burn coal rather than gas, even when the cost of carbon permits are considered.
On the other hand, higher gas prices will make renewables and nuclear energy more economically competitive. However, it takes a long time (decades potentially) to bring more nuclear power online, and renewables simply cannot respond to the
kind of upswings in energy demand seen over the last 18 months due to limitations in their battery storage capacity.
Most net-zero plans also currently assume natural gas will act as the key transition fuel when moving from fossil fuels to renewable energy. For EU countries, this meant coal power would initially be replaced by Russian natural gas, an
option now no longer tenable.
‘In Europe, coal generation rose by 18% in 2021, the first increase in almost a decade.’
Increasing gas imports from other sources offers an alternative to coal; including 10 billion cubic meters of piped gas from countries such as Azerbaijan, as well as LNG from Qatar, Egypt, or even Australia (up to 50 billion cubic meters).
However, such a plan would require import capacity to be increased, as currently, only another 80 billion cubic meters are available across the EU, compared to the 160 billion cubic meters supplied by Russia.
Furthermore, given this war has perfectly demonstrated the risks of being reliant on energy imports, energy security is going to be high up on national security agendas. Meaning the EU is likely to be apprehensive about continuing to rely
on energy imports and will wish to increase domestic energy capacity.
However, many view these issues as a short-term blip, with Scott Mackin, managing partner at Denham Capital—a sustainable infrastructure fund based in Boston—stating recent trends to be ‘bumps on the road’. Adding ‘the momentum is still
very strong toward the energy transition, in the big picture.’
But even if this a blip, any uptick in near-term emissions is worrying and will require a faster transition than previously required in order to meet net zero goals.
Rather than frustrating the green energy transition, there is potential that the conflict could actually accelerate the transition. Christian Linder, Germany’s finance minister, argues clean energy should be considered the ‘energy of
freedom’, and little galvanises political action more than the paradigm of national security.
‘Any uptick in near-term emissions is worrying and will require a faster transition than previously required.’
If the idea of renewables representing ‘energy freedom’ continues to proliferate across Europe, it may result in the level of focus—and investment—on clean energy that has up until now been missing.
In fact, many of the strategies to lower dependency on Russia are the same measures required to lower emissions. Pete Betts, a former lead climate negotiator for the EU, believes the war has lent a new sense of urgency to transitioning away
from coal, gas, and oil.
However, while rhetoric from EU politicians suggest the war may accelerate the shift to renewables, the reality may differ. It will take months if not years for a clear long term picture to emerge, but what is not in doubt, is that EU
energy policy has fundamentally and irreversibly shifted in a matter of weeks.