The world is dealing with a crucial energy crisis. The war in Ukraine has led to a massive reset in the global economy and severe geopolitical implications. Right from a rise in petroleum prices, lack of coal and energy supplies, falling economy, impacts on energy bills, food crisis, and increased cost of living and household income. The whole global energy supply chain is disrupted. As the business had started grappling with the pandemic, the Ukraine crisis has again put the world economy into high inflation. Several experts have pointed out that countries could slip into recession. This energy crisis has severely impacted developing countries. This crisis has shifted focus to other renewable energy means like wind, solar power to electric vehicles. The European Union (EU) has changed its energy policy significantly. Several European countries have upgraded their climate policies with that of the EU. Other options like Green Hydrogen, Bio-Gas and Bio-fuels are gaining momentum.
Recently, the EU announced a partial embargo on Russian oil. Last month EU introduced its ‘Green Plan’ to cut dependence on Russian fossil fuels in the next five years. This plan is based on the agenda of “Repower EU” which aims to cut Russian fossil fuels by 2027 and help achieve its climate targets and increase investments in renewable energy. The cost of the Repower EU plan is approximately €210 billion. EU is now looking for other options like domestic LNG (Liquified Natural Gas) and gas imports from the Middle East. But, importing from countries like Qatar, Azerbaijan, Australia and US would increase EU spending in the long run.
Current Situation
EU also struck a deal with Egypt and Israel for gas exports just days before. This joint purchase agreement with these Middle East countries, in the long run would be beneficial for EU energy consumption and accelerate Israel’s revenue. In addition, this deal will significantly change the regional balance and impact Moscow’s revenues. Furthermore, these partnerships will decrease Russia’s influence in European affairs and policies in the long run. Meanwhile, in counter-response to western sanctions, Russian State-owned company Gazprom lowered its gas supplies to Europe yesterday. Gazprom’s decision came as three leaders of Germany, Italy and France visited Ukraine’s capital Kyiv. Following the decision of Gazprom, European gas prices have increased even more. Russia’s political usage of gas supplies has caused severe outrage among EU leaders. The EU member states are grappling to replace Russian Gas supplies with LNG imports. The construction for gas terminals has started, as proposals have reached. Germany, the largest economy in Europe, has also made several changes in its energy and climate policy. Recently, it has introduced two packages. Its first package focuses on renewables and the second focuses on financing for LNG terminals in the LNG act. Though Germany has announced these ambitious policies, much work still has to be completed for LNG terminals.
Though the EU has imposed an oil embargo, they do not have a massive supplier than Russia. Countries like the US are delivering gas, but there is a high import cost, which would be difficult to pay in the long run. Till 2020 EU renewable energy consumption was 22%. EU Commission President Ursula von der Leyen has announced an increase in the share of renewables in 2030 to 45%. It will take time to reduce dependency on Russian fossil fuels through Renewable systems, as a lot of ground-level implementation has to be improved. Most of Europe’s pipeline infrastructure has been from the Soviet and Post-Soviet Era. Though the EU has built a new gas inter-connector from Azerbaijan to Italy that will generate electricity, but many such plans still have to be implemented now. Europe must improve its infrastructure for importing gas supplies from the Middle East, like connecting transmission lines and high-voltage, direct current (HVDC) lines.
Solutions for Faster Energy transition
However, the question arises in the process of reducing energy dependence on Russia, will this delay the energy transition? As the EU has decided to cut off Russian fossil fuels by 2027, this would lead to Europe using more coal and nuclear gas for now, which would delay the process of achieving its climate targets. Europe must improve on certain aspects to speed up its energy transition. One of the ways is increasing government incentives from fossil-based alternatives to renewable energy systems. It will be necessary for the EU to have its combined solid energy policy. Though technology and financing are available, proper regulation and implementation by government officials on the ground level are still missing. For a faster energy transition, the EU will have to work collectively with governments of member states, multinational firms and fossil fuel corporations and form regulations for changes in the system for clean and affordable energy. The focus should also be given to upgrading the regulations of the European electricity market.
This crisis has had significant opportunities as this war has pushed European countries to look for other alternatives. Though we see an increase in coal usage and carbon emissions, in the long term, there will be an increase in renewable energy systems and investments. As prices have increased, manufactures are looking for affordable and dependable renewable energy systems. Secondly, the EU ‘Green Plan’ will help develop renewable technology. In the long run, energy transition is likely to gain momentum in Europe as investors have a rising opportunity. In fact, the transition in Ukraine is the wake-up call that only manufacturing renewable technologies are not enough. Proper implementation is needed to achieve climate targets. There is an insufficiency in the system that the EU needs to address. This EU requires long-term firm strategic thinking and a strong political will. Secondly, effective policies are required to accelerate a faster energy transition. It will be essential to keep building infrastructure for its domestic LNG supplies. There are other technologies that the EU can upgrade, like rooftop solar, as rooftop solar will help immensely satisfy Europe’s electricity needs. Additionally, to boost the decarbonisation process and reduce cost, increasing the usage of hydrogen in sectors like transport, buildings and steel production could benefit the EU in the long run.
References
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