Powering Europe: The future of European Energy post-Ukraine War

This week in Brussels, Members of Parliament and experts joined at the Brussels Press Club to participate in an international hybrid conference debating Europe’s energy strategy, during and post-Ukraine War - write Tori Macdonald.

Since Russia invaded Ukraine last February, great concern has been growing around the future of powering homes and businesses across the world as many countries depend on Russia as a key energy source, especially in oil and gas. Notably, the EU, where 40% of imported natural gas supply came from Russia in 2021. (1) The war’s progression has triggered much response from major EU member states as a result of Putin’s failed attempt to weaponise energy. The backlash has been over the lacking unified energy strategy for the EU going forward.

The war has shone light over the many conflicting policies currently in place within the EU concerning energy sources such as oil, coal, nuclear power, and renewables.

Two panels of energy experts and European Parliament representatives came together to examine and propose a comprehensive long-term energy strategy for the EU, firstly from the view of Central Europe, followed by the combined perspectives of the US and Germany.

Senior contributing business journalist for Forbes, Kenneth Rapoza and Professor Alan Riley Ph.D. of City University of London moderated the panels respectively.

The conference began with some interesting insight from Jacek Saryusz-Wolski, the MEP Energy Rapporteur,commenting that the EU leaders haven’t been quick enough to consider Europe’s future and that the aim should lead straight towards 0% dependency on Russian supply.

However, in this instance, the focus naturally draws towards who and what would be the source as replacement. As Europe lacks in its own sources for energy supply, becoming fully independent wouldn’t be an option, therefore what is necessary to distinguish is which alternative energy providers are vulnerable to Russia’s blackmail or are a part of Putin’s state machine and financing and which aren’t.

Antonia Colibasanu Ph.D., Senior Analyst at Geopolitical Futures concluded that the EU needs to channel creativity and increase production on its own, through building new infrastructure, increasing liquified natural gas (LNG) imports as well as tapping into potential and currently offline reserves such as in Romania and the Black Sea.

A major concern that was raised by Professor Alan Riley centred around the difficulty in creating a uniform structure for the entire European Union when such diversity exists between member states, notably economic disparity. The factor being the lack of access to cheap and plentiful power that could satisfy the growing rich and poor divide in Europe.

Coal has always been a key player in the European energy story, and it is important for maintaining Europe’s energy security (and finances) as well as a support for competitiveness following the Russian sanctions. Even if imported from Russia, it doesn’t provide much revenue to the Putin regime and is mined and exported by private companies, not state-controlled companies which may be used as tools of Russian coercive foreign policy, experts said. The coal critics, of course, say that it doesn’t support the climate initiative.

So how can Europe maintain competitiveness in the post-Ukraine war world?

The possibility of renewable energy sources taking more of a centre stage was raised in consideration of the EU’s 2050 Climate Neutral objective. However, perspectives across the board highlighted the unlikelihood of living out the collective “green dream”. Predominantly because renewable electricity isn’t as easily stored as the traditional sources such as oil and gas.

Dr. Lars Schernikau, Co-Founder and Shareholder of HMS Bergbau AG pointed out that battery storage for wind and solar power works only for a couple of days if at all, when the reality is we need to be prepared for many weeks of backup supply.

Hydrogen energy as an alternative source doesn’t yet have the capacity to be stored in necessary amounts. An even greater concern raised by Schernikau was over a electricity shortage due to the significant increase in electricity consumption in recent years. The point was made that Germany have now achieved only 5 percent of the total electricity production in Germany from renewables following a Euro1 trillion investment of taxpayers’ money. However, in the race to be climate neutral, politicians seem to have missed the reality that electricity is also a finite energy source. The key insight is that energy efficiency is more than just switching bulbs, it’s about how efficiently the energy at the source is used to produce the energy.

How will we charge all our new electric cars if we don’t have enough power available at the source? By attempting to avert destroying the planet, we’re blindsiding ourselves into another form of self-destruction, Schernikau says.

The consensus settled that as wonderful an idea as renewable energy sources are, they can realistically only support limited amount of Europe’s energy output. So, this begs a new question, if renewable energy sources aren’t enough to create self-sufficiency, what can Europe do?

Saryusz-Wolski hailed nuclear power as a source however the risks of continued links to Russia of reactor and fuel suppliers need to be carefully examined. This opened the floor to enquire around potential new players such as Asian countries such as Korea and Japan. Equally, addressing the rising costs of nuclear energy operations and security of spent fuel is in order.

Schernikau pointed out that 2021 was the first year in four decades that the number of people without electricity rose by 20 million (2), creating a monumental problem for humanity. A remark of lasting impression was made in the point’s conclusion, “the more we rise prices, more people will be starved. Nobody counts that.”

By now, the threat of inaction have very much reared its ugly head, to which an interesting angle on tackling the Putin side of things was brought forward by Dr Vladislav Inozemtsev, a Washington, D.C. based energy economist and Director of the Centre for Post-Industrial Studies.

“What was surprising was when the EU announced sanctions against Russian energy companies in coal and oil but not one touched natural gas: the most important dependency between the EU and Russia.” Inozemtsev further indicated that the EU should target industries owned by the Russian government and making the most revenue for it to finance the war in Ukraine. “Coal is 100% private in Russia. The aim should be to punish the government not businesses, therefore look at the company in question, is it state owned, or market based?”

Inozemtsev further highlighted that we create a huge future risk through restricting our energy sources.

The panel also addressed funding the reconstruction of Ukraine. Russia will clearly resist paying for the damage it incurred. The reality of the matter is that Europe will remain dependent on fossil fuels for at least another 15-20 years and Ukraine need an enormous amount of money for restoration. Inozemtsev then raised a refreshing solution- what if there is a way of redirecting Russia’s energy revenue for the sake of Europe and Ukraine?

His conclusion, “Europe could buy gas from Russia at lower prices using a price ceiling, sell to European consumers at higher (market) prices, and use the difference in profits for Ukraine, sending it through as solidarity tax.” To which Alan Riley Ph.D. signalled the next issue, through what mechanism could this process be achieved? Riley went on to propose the formulation of an EU regulatory statute? as a means to ensure a lower price, proceeded by the European Common Purchasing Authority to auction onto European markets.” As a result, this would not only achieve an end to Russian co-dependency and influence, but equally create benefit for Europeans and support Ukraine.

The question now arises whether EU leaders can wake up in time to avoid a bombshell (pardon the pun) and act with resilience and fresh eyes to compile a comprehensive energy policy in consideration of its long-term strategic objectives whilst supporting the continent’s economic well-being. Let’s not forget we’re still to deal with the financial aftermath of Covid let alone the Ukraine war. If a strategy can come together that promotes diversification and supports those in greatest need, we can find a way through the mud and co-create a new world.

References:

• What impact have they had on its oil and gas exports? - BBC
  https://www.bbc.com/news/58888451#:~:text=Europe%20still%20relies%20on%20Russian%20gas&text=In%202021%2C%20Russia%20was%20supplying,its%20gas%20supply%20from%20Russian.

• For the first time in decades, the number of people without access to electricity is set to increase in 2022 – IEA
  https://www.iea.org/commentaries/for-the-first-time-in-decades-the-number-of-people-without-access-to-electricity-is-set-to-increase-in-2022

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