The Russian invasion has launched a war with Europe that, outside Ukraine, will be fought in pipelines and power stations. European countries are bracing themselves in case they have to do without Russian energy. Breaking free from Moscow without boosting emissions is possible – but would require transformation on a wartime scale.
The challenge is to switch to an entirely new energy mix by next winter. 40 per cent of Europe’s gas imports and a quarter of its oil come from Russia. Germany is especially vulnerable: Russia provides more than half its gas.
Europe’s leaders are discussing a full energy embargo. Germany doesn’t want one: its chancellor has suspended the Nord Stream 2 pipeline but stated bluntly last night that other Russian supplies were essential “for the daily lives of our citizens”. And there’s no doubt an embargo would hurt. “You’re talking about wartime conditions,” says Nikos Tsafos of the Center for Strategic and International Studies.
Which only strengthens the case for being prepared – and the immediate challenge is to source and store enough gas over the next six months.
Could Europe do without? In principle, but that would mean…
Maximising alternative supplies. Half Europe’s Russian gas imports could be sourced elsewhere, but at high cost. Pipelines from Norway, Algeria and Azerbaijan are already running at capacity. Gaps could be filled by boosting imports of liquified natural gas (LNG) on ships from the USA, Qatar and Australia, but at even higher prices. Filling Europe’s storage tanks and caverns in 2022 will cost €70 billion compared with €12 billion in previous years.
Cutting demand. 20 per cent of Europe’s gas demand would still be unmet. Overall European energy demand has been steady for thirty years, but would need to fall to ease the pain of the Russian energy shortfall. High market prices for heating, petrol and diesel would impact demand – but a level of state intervention not seen in decades would be needed too. “If it’s an economic war, your markets are not working well,” says Ben McWilliams of Bruegel, the think-tank. “You’re going to need some kind of coordination.” That in turn means…
- Switching gas for other fuels. Nuclear power plants planned for closure could be kept open. Ingrid Nestle, spokesperson for the German Greens in the Bundestag, says every option is being assessed, including extending nuclear and coal. “Nothing is out because of ideology, but nothing is in automatically.”
- Using less. In a crunch next winter, governments could ask factories to pause production to save energy. The International Energy Agency (IEA) suggests they urge people to turn thermostats down at home and regulate heating in offices. Turning it down by 1°C across Europe would reduce gas demand by 10 billion cubic metres a year (equivalent to two-thirds of the LNG Europe imported from Russia in 2021). In the longer term, boosting efficiency of homes would help. According to the UK’s Energy and Climate Intelligence Unit, lifting British homes in energy efficiency band D to band C would bring a 15 per cent fall in the country’s gas use – equivalent to 8 per cent of imports.
- Doubling down on renewables. Investments in solar and wind are key to long-term resilience against Russia. “If we’re getting off Russian gas, we’ve got to plan for the next five winters,” McWilliams says. Rapidly installing solar panels this summer won’t help for next winter but is vital for getting through the next three or four years.
Will Europe do without?
- Gas – probably not. Russian gas accounts for 40 per cent of European imports but only 10 per cent of Russia’s export revenues. “Folks, look at the damn numbers,” Tsafos says. Cutting off supply would hurt Europe more than it would Russia. “There’s a flippancy that I see [in saying] ‘let’s turn off the gas, show them!’ Having 500 million Europeans freeze next winter isn’t going to show him [Putin] anything.”
- Oil – conceivably. An oil embargo would hurt Russia more and Europe less. The US and European have hinted they may sanction Russian crude oil, which they can more easily do without. But the same fundamental solution applies: scavenge for non-Russian barrels and reduce demand.
What this would mean for net zero. European governments need to keep energy flowing and as cheap as possible. In the short term that could mean increased emissions as they find alternatives to Russian gas in oil and even coal. But this crisis has already put politics above markets – not least with sanctions that hurt western as well as Russian businesses.
The war is forcing governments to make choices that could accelerate a move away from fossil fuels. They could seize the moment to supercharge renewables, retrofitting and heat pumps – “It’s an opportunity to force through things that were slowly becoming competitive… this can go faster now,” McWilliams says.
Seeing and taking opportunities are very different things, but this is the second seismic shock to the old energy order in three years. Time for a new one?
How national security is going to run the energy transition
The first victim of war might be the truth, but this one has also dispelled a delusion – namely that Europe’s increasing reliance on Russian gas up to and after 2014 was ever a sound basis for energy security.
European imports of Russian gas, arriving by fixed pipelines and under long term contracts, now hold the continent’s economy to ransom. That Russian gas imports to Europe grew since the annexation of Crimea in 2014, from 37 per cent to 47 per cent of the total, shows how economics took priority over security in European energy policy.
Ending this dependency will mean serious short-term disruption.
Slow & inefficient transition
Episode one of our myth-busting new podcast series with the Centre for Net Zero and Octopus Energy will be available for Tortoise members to listen to from 9 March.
Cut the cord
Russia’s attack on the Zaporizhia nuclear power plant last week raised the question whether part of Putin’s strategy is to starve Ukraine of access to energy. A total of 15 reactors at four locations account for nearly a quarter of Ukraine’s power supply. If another site is taken – the nearest to Russian deployments is north of Mykolaiv and Odessa – it would leave Ukrainian electricity at the mercy of Russian troops that already control most of the Donbas, where most of Ukraine’s coal is mined. After the invasion of Crimea in 2014, Kyiv had the initiative to switch to the EU as its main gas supplier, but the grid is still closely intertwined with Russia’s. “Ukraine must now become part of the European electricity network as soon as possible,” Kadri Simson, EU Energy Commissioner said on Saturday. “We have no other option”.
Oil prices climbed to their highest since 2008 this week, as Brent international briefly hit a high of $139 a barrel. Urals, the main Russian benchmark, was trading at a 25 per cent discount. Given the geopolitical premium, are fossil fuels still a good investment? Warren Buffet thinks so. His firm, Berkshire Hathaway, just revealed a $5bn stake in Occidental Petroleum and bought more shares in Chevron. At the same time the European Renewable Energy Index climbed nearly 10 per cent – its biggest rise since the start of the pandemic – as investors piled into green stocks following the invasion. “The last ten days have made it even clearer: renewable energy is secure, clean and popular,” says Bernice Lee of Chatham House. “Therefore it is most likely that countries are going to accelerate their climate transition, even if, in the short term, energy security may push them back into oil and gas and even coal.” It’s a sunny outlook, considering. A recession or a supply gap next winter could turn it cloudy again.
engagement and activism
Nigel Farage has launched a campaign for a referendum on the government’s net zero policy. Power Not Poverty (formerly Britain Means Business, before that Leave Means Leave) has the backing of Richard Tice, fellow Brexiteer and leader of Reform UK, and is lobbying for green levies and VAT to be scrapped on energy bills. Meanwhile, 34 Tory MPs organised by the Net Zero Scrutiny Group are urging a reversal of plans to seal Britain’s remaining shale gas wells – a solution they believe can counter a surge in energy bills driven mainly by the global markets. In response to pressure on his right, Boris Johnson is reportedly considering a temporary “climate pass” for the gas industry and will set out an “energy supply strategy” this week. A parliamentary petition for a referendum on net zero currently has 23,000 signatures. The government says referendums are to endorse major constitutional change – not debate policy.
Papua or pulp
Indonesia’s greenhouse gas emissions could increase by a third, according to an analysis of government plans to boost crop production on the island of Papua. An area nearly the size of Belgium – 2.7 million hectares – has been mapped by officials as having potential to grow rice and other staples. Much of the area is densely forested, and researchers from the NGO Pusaka calculated that clearing it would release 616 million metric tons of CO2 equivalent into the atmosphere. Satellite imaging and on-the-ground investigation revealed that a Manhattan sized area of forest was felled in the region last year, with pulpwood and palm oil companies the prime suspects. Clearly right now the incentive is to cut. But if Indonesia chose to ratchet up its carbon price – currently set at $2 per metric ton – the government could cash in on the international market in carbon credits. The catastrophic alternative is deforestation and a failure to meet Indonesia’s 2030 emissions target.
Thanks for reading.
Additional reporting by Barney Macintyre. Graphics by Katie Riley. Edited by Giles Whittell.
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