War in Ukraine accelerates Europe’s pivot to renewables

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Europe aims to lead the global fight against climate change by rapidly moving away from fossil fuels. Yet in the wake of the pandemic, the continent has been rocked by disruptions to its energy supply that have sent prices skyrocketing – even before the unrest sparked by Russia’s invasion of Ukraine. Now the forces have combined to put Europe’s so-called energy transition on a war of sorts, testing the limits of an accelerated timetable for adopting new technologies and leaving consumers to pay higher bills.

1. How fast is Europe changing?

A decades-long push in wind and solar power has turned countries like Denmark and Germany into technology leaders. The 27 countries of the European Union obtained around a fifth of their total energy from renewables in 2020 and had planned to double this share to 40% by 2030. Following the war in Ukraine, the target was raised to 45%. Germany, which depended on Russia for most of its oil, natural gas and coal, has advanced its goal of 100% renewable energy by more than a decade to 2035. is a very ambitious challenge because wind and solar farms take years to plan and build. On the contrary, the crisis has made EU policymakers more committed to the bloc’s so-called Green Deal, the flagship climate policy that includes a massive package of laws to achieve the goal of zeroing greenhouse gas emissions. greenhouse effect by the middle of the century.

2. What disrupted Europe’s energy supply?

In 2021, Europe’s vulnerability was laid bare by a chain of unexpected events: a stronger-than-expected post-pandemic recovery (which created higher energy demand) coincided with weather patterns that created unusually low wind speeds, at a time when natural gas was in short supply due to an unusually cold and long winter. As a result, electricity prices more than tripled from August to December. Then, in February, the Russian military campaign triggered a series of financial sanctions against Moscow. President Vladimir Putin retaliated by militarizing natural gas flows to his neighbors. At the end of April, he stepped up threats and cut off natural gas flowing to Poland and Bulgaria, although these are two countries where the impact has been low.

3. Why is Russia such an important factor?

Russia is the world’s largest gas exporter and Europe is its biggest customer. As coal and nuclear power plants around the bloc have been shut down in recent years, some countries have become more dependent on giant pipelines carrying gas from Siberia. For many years, EU officials have talked about the need to wean off Russian supplies, but as both sides benefited and gas delivered by pipeline was often cheaper (and cleaner) than other sources of energy, little action has been taken. The EU depended on gas for around a quarter of its energy, with Russia accounting for more than a third of that supply in 2021, up from 26% in 2001. When the conflict in Ukraine broke out, it was suddenly untenable for Europe to continue spending up to $1 billion a day on coal, gas and oil imported from Russia – since he was funding the war machine.

4. How has Europe reacted?

Europe’s plans have suddenly become much more urgent. The first Nord Stream 2, a second gas link between Russia and Germany that had become entangled in a political battle, has been firmly put on hold. As the United States and other allies embargoed Russian energy, European policymakers raced to find alternative sources of supply. They staged a multi-level retreat that began with a ban on Russian coal from August. Then they struggled for weeks trying to come up with a plan to phase out Russian oil this year and cut gas imports by two-thirds. This is difficult because some refineries and chemical plants in the eastern part of the bloc are captive customers, as they obtain their raw materials via pipelines from Russia.

European manufacturers have been affected as energy prices have risen faster than in other regions. Some of the continent’s largest fertilizer makers, steel producers and aluminum smelters have cut production because electricity and gas prices at least four times higher than historical standards made them uncompetitive on world markets. German officials have urged citizens to reduce their energy use and warned of possible natural gas rationing, shaking businesses from automakers to cement makers. As the war dragged on for months, more and more economists were predicting that the energy crisis would cause Europe’s economy to shrink, tipping it into a recession.

6. How did Europe keep the lights on?

At least initially, there was a return to dirtier fuels. The use of hard coal and lignite to generate electricity in the EU increased by 12% in the first quarter of 2022 compared to the previous year, as decommissioned power plants were reviewed. In the longer term, there is no easy compromise for an energy mix that also includes around 35% oil, 12% coal and 13% nuclear. Efforts to bring more liquefied natural gas by ship, which costs about four times as much as the Russian pipeline, have been constrained by limited infrastructure and global supplies. There has been talk of delaying nuclear phase-out in Germany and other countries – a stable source of electricity with virtually no emissions – but only Belgium has extended the life of two reactors. At the same time, France’s aging nuclear power plants, which remain the backbone of the region’s integrated power system, are becoming increasingly unreliable. Fleet production could fall to the lowest in more than three decades this year.

7. How fast can he move?

It’s not clear. Some member states, including Poland, have questioned the ambitious switch to renewables in light of the war and record energy prices. But European leaders have stuck to the Green Deal, making renewables and energy efficiency the best long-term solution. Moreover, higher prices mean that more of the burden falls on consumers. It is driving the fastest inflation in decades, pushing the so-called “cost of living crisis” to the top of the political agenda. At the end of 2021, many measures were taken to help the poorest: France distributed “energy vouchers”, Italy limited price increases and Sweden offered discounts based on energy consumption. But these are probably temporary measures. The break with Russia means Europe will likely face higher energy costs for the foreseeable future. Overall, renewable energy subsidies are being phased out, meaning energy prices will need to be high enough to cover the cost of green investments.

• A data visualization of how Russia’s war in Ukraine is stifling the world’s supply of natural resources.

• Javier Blas of Bloomberg Opinion on the need for Europe to reduce energy demand and stop buying Russian oil.

• David Fickling breaks down Russia’s gas exports to Europe.

• Related QuickTakes on the EU Green Deal, how Europe became dependent on Putin for gas, Nord Stream 2 and EU plans for a border carbon tax.

• Europe’s wartime mission to abandon Russian oil and gas.

More stories like this are available at bloomberg.com

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