The issue of gas becomes increasingly sensitive as the war progresses, causing many people to consider alternatives to replace Russia as Europe’s primary gas supplier, as the war continues. There are some potential alternatives in the future
resulting from this.
Technological advancements and changes in our way of life are driven by crises and wars. The current crisis is no different. It drives forward a change in the Energy Sector. For example, during World War I meteorology, radar, and medicine such as
Penicillin were not widely used, with Penicillian the drug only became available to soldiers during World War II when the United States started to mass produce it to reduce pain and deaths on the battlefield it then later became widely available to the rest of the population. Similar to this issue in World War II, the Russian-Ukraine war has made the world start to listen which has led to the European Union seeking alternative sources of energy after Russia began weaponizing gas in order to exert pressure on them. In the long run, this may have huge positive effects on our planet because it created a new push for renewable energy.
How the crisis drives us into an energy revolution As a result of this crisis, the importance of clean energy should be emphasized to the world. Not only will clean energy reduce pollution or achieve net zero emissions, but it will also make a country more secure, and less dependent on foreign whims. Gas prices are now around ten times higher than they were a decade ago, making electricity prices more expensive as well. Energy security became the top concern for governments as a result of the situation. Governments are spending billions of euros to support households and businesses, but the energy industry is in need of a long-term solution.
Companies using renewable energy and nuclear power have a chance to demonstrate how important energy security is to them. These companies fell out of the public eye a little over the last decade (especially after the Fukushima disaster), but interest has slowly recovered due to decarbonization plans in recent years. With Western countries realizing their vulnerabilities, this issue gains even more attention. Using REPowerEU, European countries will be able to be independent of Russian fossil fuels by 2030 by “dramatically accelerating the clean energy transition”. Although Europe currently uses seaborne liquefied natural gas from US, Qatar as a temporary solution, this is only a temporary measure, and they aim to eliminate dependence on imported fossil fuels in the long term.
The European Union will have 17.5 gigawatts of hydrogen capacity within the next three years, and the renewable energy target has been raised from 40% to 45% by 2030. This additional 5% would equal a capacity increase of 200 gigawatts. On the other hand, concerns have been raised regarding the Chinese dominance of solar markets. Moreover, they made it so cheap that all other countries struggled to compete. They control more than 80% of the manufacturing chain’s items like cells and polysilicon. Moreover, they dominate the market for rare earth metals, used in magnets critical to wind turbine and electric car manufacturing. It is ironic that Russia controls over 40% of the enriched uranium market, which is a key fuel source for electricity generation.
Could Spain become the gas center of Europe?
Europe currently relies on liquefied gas to compensate for the deficit caused by Russian gas line closures. However, additional infrastructure is required to turn this temporary solution into an efficient one. As 27% of Europe’s regasification capacity is located on Spanish soil, Spain is the most prepared European country for receiving liquified gas from the US / Qatar or any other supplier. Despite this, there is no major pipeline connecting Spain to France or France with Europe as a whole.
However, if sufficient monetary commitment is made, this could be implemented within a year with the existing Maghreb Europe pipeline, which has already been constructed with the most difficult type of pipeline – under water – but there is a major geopolitical problem. Currently, the Moroccan-Algiers Western Sahara dispute creates a divide between the two countries – one of the two major pipelines run through Morocco – which, on its own, wouldn’t be a problem since the other pipeline connects Algiers directly to Spain.
Spain recently took a stand to support Morocco and has been selling gas to Morocco that it purchased from Algiers. Unless this political disagreement is resolved, Algeria won’t be able to supply Spain’s gas needs. In this dispute, Spain’s more expensive and diverse gas consumption is useful, since 72% of their gas consumption comes from ships, which is liquefied gas. It is obviously much more expensive, but also more diverse, and now that Spain has the infrastructure to transform and transport liquefied gas into Europe, this proves an effective solution.
Role of the Gulf Countries in Supplying Germany
A liquefied natural gas supply agreement has been reached between the United Arab Emirates and Germany. In addition to the first delivery of 137 000 cubic meters of LNG scheduled to be delivered by Abu Dhabi National Oil Company (ADNOC) within 2022, 5 additional deliveries have already been reserved for arrival in 2023. While the UAE’s primary export is oil, it is only a modest LNG exporter, but they plan to double its LNG production by 2026 to 12 million tonnes.
Compared to the amount Germany needs to replace its gas deficit, this is a very small amount. In order to secure natural gas, the German Chancellor traveled throughout the Arabian Gulf. He began in Saudi Arabia, followed by Qatar, where he tried to secure further agreements. A provisional LNG agreement had already been signed with Qatar – the world’s largest exporter – but it was not possible to reach a concrete agreement due to pricing issues and contract length issues. Because of this, he flew to Doha personally to assist in the negotiations. As part of the UAE agreements, many other energy supplies were also agreed to. For example, ammonia to fuel hydrogen. In addition, diesel will be delivered – the first rounds have already been delivered – at a monthly total of 250,000 tons. Due to incidents such as the murder of a journalist and UAE involvement in Yemen’s war, these negotiations are hindered by geopolitical decisions such as Germany’s halt of arms exports to UAE’s ally, Saudi Arabia.
A struggle by European powers to secure gas supplies for the coming winter and to break away from Russian dependence is hindered by past decisions time and time again, which force them to negotiate from a position of necessity, which may result in higher prices and further economic pressure. We will be able to see the long-term impact of the energy decisions made today as the crisis progresses and whether Europe can be free of Russian gas. Sanctions and the current geopolitical climate have made it difficult for analysts to recommend investment strategies on energy prices – further fluctuations are forecasted. Therefore, investors are looking to hold cash positions or invest in less risky portfolios.
- Financial Times (2022): “Special Report Energy Transition” l https://www.ft.com/reports/energy-transition
- Financial Times (2022): “How Europe can adapt to living without Russian gas for years” l https://www.ft.com/content/e192f020-d53e-4a0f-9e17-301d44eadcff?shareType=nongift
- Financial Times (2022): “UAE agrees LNG deal with Germany as Berlin looks to
replace Russian gas” l https://www.ft.com/content/0065dfcc-4519-41b6-9883-92e7ff13777d?shareType=nongift
- Financial Times (2022): “Russia weaponisation of gas spurs clean energy push to secure supply” l https://www.ft.com/content/50816240-9b68-43a8-8541-c3a728d63799
- BURTON K. B. : “The Scientific and Technological Advances of World War II” l https://www.nationalww2museum.org/war/articles/scientific-and-technologicaladvances-world-war-ii