Russia is stepping up its pressure on the European natural gas market. Moscow has cut the capacity of the main oil pipeline to Germany by 60 per cent since last week, saying EU sanctions are causing maintenance problems; however, it did not increase supply by other means. Many capitals believe that the Kremlin is using energy to apply pressure as its troops fight a war of illness in Ukraine. Gas prices in Europe have risen by 50 per cent in recent weeks and shortages make it difficult to upgrade gas tanks before winter. Ten EU states have issued initial gas emergency alerts. The International Energy Agency said the continent should be prepared for a full cut in Russian gas exports this winter.
In addition to preparing for energy conservation, countries such as Germany, Austria and the Netherlands are restarting dormant coal – fired power stations or raising their output limits, delaying the transition to green energy. In part, the return to coal is inevitable. Keeping the lights on, hospitals open and factories set up are an absolute priority for governments.
Failure to do so would lead to misery for millions and reverse shocks. This could undermine Europe’s overwhelming support for climate change efforts and Ukraine’s defense against the Russian invasion, which could lead to an ugly peace with Moscow over Kyiv. However, the coal return should be short-lived; pressure not to delay the transition to clean energy, but to speed it up.
Europe has halved the percentage of its total gas supply from Russia since the invasion of Ukraine, but most of the options have already been used to diversify suppliers. So you have to focus on alternative energy sources and efficiency. To reduce coal burning, existing nuclear power stations must be kept in operation for as long as possible. Germany was criticized for continuing to dismantle the remaining nuclear power plants; Berlin argues that technical and security factors prevent it from keeping them open. Some nuclear operators claim that plant life can be extended safely, but this requires governments to make timely decisions.
The EMI is right to say that the global response to the current energy shortage is the same as the climate crisis: a “massive increase” in investment to accelerate the transition to clean energy. Things are on track; in the five years following the Paris Agreement of 2015, investment in clean energy increased by 2 per cent per annum; from 2020, the pace has accelerated to 12 percent. However, in part, this reflects rising material costs and spending on renewable energy and energy efficiency falling well below what is required.
The industry says that renewable energy projects are not being held back by a lack of funds, but by difficult regulatory and planning processes in many countries, as well as grid connection problems. Over-bureaucracy and accelerating investment are needed to modernize power grids and develop warehouses so that they can address higher levels of intermittent renewable energy.
EU capitals are drawing up rationing plans in the event of a Russian breakdown, although they hope they will not be needed. Coordination is needed to avoid clashes on supplies eroding European solidarity. Rising prices are already encouraging businesses and households to reduce energy consumption; Governments must take steps to protect the most vulnerable from hardship and encourage housing isolation.
Still, many governments could do more through carefully targeted information campaigns to help consumers understand how to conserve energy and explain the real reason, rather than climate efforts, why prices are so high. Russia cannot be allowed to achieve what it cannot achieve on the battlefield through a myriad of energy.
Copyright – The Financial Times Limited, 2021.
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