To address the immediate oil price spike, countries globally have taken collective action to release strategic oil reserves. Agreeing to release a combined 61.7 million barrels (equivalent to 3% of total emergency reserves) – with the lion’s share coming from the US, Japan, South Korea and Germany. The US has also been urging the OPEC-member Gulf states to increase oil production to reduce price volatility, and has met with Venezuela in the hopes of replacing a shortfall in US domestic supply due to Russian sanctions.
Specific to the EU, the International Energy Agency (IEA) has put forward a 10-point plan10 outlining a path for the region to reduce its Russian gas dependency by more than 50 bcm over the coming year. It believes the path is consistent with the EU’s climate ambitions and the European Green Deal, and with additional steps that could see the EU completely eliminate the need for Russian gas imports by 2030.
In looking to increasing regional security and self-sufficiency in the near-term while also remaining committed to investing in green energy, one of the key challenges for the EU will be in ramping up the pace at which the bloc can install the infrastructure needed to create sustainable alternatives to the status quo.
Proposed solutions by the IEA include:
- Diversifying gas supply with pipeline imports from Norway or Azerbaijan, for example, when Russian import contracts expire (a portion is set to expire by the end of 2022),
- Ramping up LNG (liquified natural gas) imports given the EU’s access to spare regasification capacity (although current supply is also subject to demand from other gas importers, especially across Asia – putting upward pressure on prices),
- Scaling up biogas and biomethane supply, and low-carbon hydrogen via electrolysis (but these options offer limited potential in the near term given the lead times for new projects),
- Introducing minimum gas storage obligations to improve resilience; increasing the use of working storage capacity prior to the winter ‘heating’ season to provide a buffer to cover surges in demand or supply shortfalls (although this also has the potential to push up gas prices, while regional coordination and a harmonised approach are needed to ensure optimal use of available storage capacity in the EU),
- Accelerating the deployment of new wind and solar projects. Investment in solar PV (photovoltaics) and wind power in 2022 are already expected to increase EU output from renewable energy sources by 15% compared to 2021. Faster deployment of these technologies through a concerted policy effort can reduce consumer bills and further reduce gas demand.
- Maximising output from existing low emissions sources including bioenergy and nuclear – returning nuclear reactors to safe operations and increasing capacity at bioenergy power plants can help to reduce gas use for electricity,
- Enacting near-term taxes on windfall profits to soften the impact of price hikes on the most vulnerable consumers,
- Speeding up the replacement of gas boilers with heat pumps – with the IEA forecasting the potential to cut gas use by ca 2 bcm within a year,
- Accelerating energy efficiency improvements in buildings and industry, reducing gas use by another 2 bcm within a year,
- Encouraging consumers to reduce heating temperature – by 1 °C, if only temporarily, to help reduces gas use by up to 10 bcm within a year,
- Innovation and policies to create a more flexible power system, that improves energy efficiency and helps to loosens the strong links between gas supply and Europe’s electricity security.
On the efforts to ramp up LNG imports for regasification, Spain has the largest port and operational capacity to do this, but the cost of creating viable gas pipe connections to other EU countries, remains a challenge. Spain has called on countries to share the cost of the infrastructure build-out, but even with cooperation, installing the necessary piping could take years to construct and would also need to be ‘future-proofed’, for example, to carry lower-emission or mixed gases such as biomethane or green hydrogen11. There is also a fuel-switching option, replacing gas with coal-fired power or alternative liquid fuels within the existing gas-fired power plants, but this approach risks derailing the EU’s emissions targets, certainly in the near term.
More generally, for countries within and beyond the borders of Europe to sustainably reduce their dependence on Russian oil and gas, any ramp up in fossil-fuel generated power in the near term, or redirection of existing global oil and gas supply, will need to be accompanied by policies to improve renewable technologies and alternative solutions to guarantee local societal security and global climate security.