Russia’s invasion of Ukraine has triggered a European quest to lower dependence on Russian gas and move closer to renewable energy – with a simultaneous triumph eyed over Russian President Vladimir Putin and climate change.
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, the European Commission (EC) vice-president responsible for the European Green Deal – the EU’s energy transition masterplan backed by 270 billion euros’ ($296bn) worth of bonds issued by Brussels.
Energy experts told Al Jazeera the war could indeed catapult renewable energy to stratospheric levels and put Europe on track to meet its carbon emissions targets, but in the short term it could force electricity blackouts, factory shutdowns and capricious energy prices.
The International Energy Agency (IEA) 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. The organisation says these measures could be enacted in the next year, without building new infrastructure.
A few days after the IEA’s statement, the European Commission announced 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 EC 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 EC estimates Russia supplied 155bcm last year.
The IEA plan would reduce Russian gas use by 33bcm by asking Europeans to turn down their thermostats by 1 degree Celsius (33.8 Fahrenheit) 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. The total savings of Russian gas amount to 63bcm.
The European Commission’s REPowerEU plan would reduce gas use by just more than 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. The total savings of Russian gas in this regard amount to 100bcm.
But according to Costis Stambolis, who directs the Institute of Energy for Southeast Europe (IENE), a think tank, such hopes are akin to “a bedtime story”.
He estimates the world’s LNG producers only have about 20bcm of uncommitted capacity, and the European Union can perhaps eke an additional 10bcm out of non-Russian pipelines. And even that would not be easy, he said, 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 told Al Jazeera.
On the other side of Europe, Professor Jonathan Stern agrees the EC 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 said, “we’re looking at 2-3 years before we get anything additionally substantial.”
The question therefore arises, he explained, 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 accelerated in mid-September, suggesting that limiting energy supplies to long-term contract obligations was a move coordinated with military manoeuvres.
A hostile Russian cutoff would leave Europe with 40 percent 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 facilities.
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 said.
What will it cost?
Even before the invasion, the European Central Bank (ECB) estimated that high energy costs would lower EU growth by 0.5 percent.
Energy prices surged more than 30 percent in February, driving inflation to 5.8 percent from 5.1 percent 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 200 billion euros in windfall profits fossil fuel companies stand to make due to high prices.
Should the EC 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, said 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,” said Stern.
“The best case [scenario] would be that we had retained Russian supplies but this has 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 does not 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 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, patriotic duty for Europe, and Ukraine’s war is partly becoming an energy war.
