L R AS Published on Tuesday 12 April 2022 - n° 401 - Categories:forecasts;
The war in Ukraine is a factor in the major energy transformation
The invasion of Ukraine is changing the debate on energy, prices and renewables, according to Indra Overland, director of the Energy Research Centre at the Norwegian Institute of International Affairs. He says there will be no return to the situation before February 2022.
The war in Ukraine is irreversibly changing the global energy landscape, making the massive deployment of renewable energy a certainty. But labour problems, equipment shortages and dependence on Chinese manufacturing remain obstacles.
Energy relations between Russia and Europe have always been complex. Europe could face big problems by cutting off gas supplies from Russia completely, but Moscow will always need a buyer.
In principle, much of the Russian gas previously sold to Europe could go to Asia. However, this would require new infrastructure, such as pipelines or liquid natural gas (LNG) liquefaction terminals. These would take a few years to prepare. And LNG may be difficult at present, as it requires Western technology and know-how, and sanctions will pose many problems. Access to capital will be a problem for both LNG and pipelines, although in principle the Chinese could provide the pipeline financing. Only this new infrastructure would absorb some of the benefits.
If Russian gas supplies were interrupted, the situation could be very difficult in Europe. However, it could also help to defeat the Putin regime in Russia, solving some of Europe's long-term problems. People know that energy prices are linked to this Russian invasion, but it is too early to say how this will play out
Spain, perhaps the UK (and the Netherlands if it still extracts gas from Groningen) can best handle a halt in Russian gas imports. The most exposed country is probably Germany, with its 50% dependence on Russian gas. It is highly dependent on foreign supplies and puts Europe at risk
The Russian gas crisis will lead to a massive development of renewable energies and probably also of nuclear power. The question is how fast, as the lack of manpower and equipment and the dependence on Chinese equipment will be important factors.
High energy prices may stimulate bilateral agreements (PPAs), but prices will remain high for a long time, as it will be very difficult for Russia to give up Crimea, and impossible for the West to accept the continued occupation of Crimea. The conflict is gradually becoming intractable, hence the use of renewable energy. European governments will take steps to support new deployments of solar, wind and heat pumps. Permits are now being granted more easily in several countries. Tax incentives are being provided. There is going to be a vast relaxation of regulation. The invasion of Ukraine is qualitatively changing the nature of many arguments and discussions about energy, prices and what people should accept. Yet Russia has been very active in supporting right-wing populists across the West who are anti-climate and anti-renewable energy. The reduction in this support both because of the crackdown by Western governments and the reduction in Russian money and access should also help to reduce resistance to new renewable energy installations.
In the short term, Russia and Ukraine are the biggest losers. Ukraine has suffered a gruesome attack, Russia is shooting itself in the foot with every weapon at its disposal. Tens of thousands of young Russians are killed, injured or traumatised; weapons worth billions and billions of dollars are destroyed; the economy is devastated; the most educated and dynamic young people are leaving; Russia has become and will remain a pariah among all developed countries.
The sanctions taken, much more serious than those of 2014, will have a much greater effect. In the longer term, Russia will inevitably remain a big loser as long as Putin is in power, while Ukraine may emerge victorious and greatly strengthened. As for the winners, other oil and gas exporters such as Canada, Norway, Qatar and Saudi Arabia will be the big winners.
The US will also be a big winner, both as a major oil and gas producer and because Russian aggression greatly strengthens the US position in Europe, as well as NATO.
As renewables are the winners, fossil fuels will be the losers. There will be a geopolitical rebalancing based on the decline of fossil fuels and the rise of renewables. The invasion also strengthens the Democratic party within the US, which is again good for the US as long as Trump is the alternative.
PV Magazine of 31 March 2022
Editor's note Finally a commentary considering the difficulties of developing renewable energy due to the lack of material (panels) and personnel. If European leaders were clear-sighted and realistic, they would advocate remedies on both counts. At the same time, this would mean that a long-term policy in favour of renewables is needed and that demanding a greening of electricity in the coming six months is a delusion unworthy of responsible leaders. It is always reality that dictates the actions of leaders. Whether we like it or not
