Europe’s Energy Crunch
Europe Kicks Its Dependence on Russian Fossil Fuels
It’s been almost a year since Russia launched its war in Ukraine, triggering Europe’s worst energy crisis in decades. But rather than collapse in the absence of a key supplier, the region has nearly eliminated its dependence on Russian fossil fuels.
In the past year, Europe’s spending on Russian coal, oil and natural gas has dropped from roughly $1 billion a day to a fraction of that amount, and it’s accelerating the shift to a low-carbon economy. Here are some key takeaways:
GREEN TECH:
The European Union has long been a leader in going green. When the fallout from the war sent natural gas and power prices soaring, that transition kicked into overdrive.
Europe Deployed a Record Amount of Green Tech in 2022
A shift to renewables is the only way to permanently cut fossil fuels
Solar installations jumped by 40-gigawatts last year — a 35% increase from 2021 — as consumers sought to cut their energy bills. Meanwhile, battery storage in the region surged by 79%, largely due to the residential sector.
While wind power also increased, inflation and permitting and regulatory issues continued to pose hurdles. Still, “the energy crisis has focused political minds on resolving some of the issues around permitting,” said Oliver Metcalfe, an analyst at BloombergNEF.
GAS AND COAL:
Europe has raced to fill part of the energy gap with liquefied natural gas, relying largely on imports from the US and Qatar — though some of those shipments are coming from Russia. The region’s LNG imports have nearly doubled since 2021. Germany in particular has added new terminals to keep flows coming in the years to come.
Russia Turned Off the Gas Pipes to Europe in 2022
And liquefied supplies filled the gap
Coal use — which increased 7% in the EU last year — has also played a part in helping to ease the supply crunch in the short-term.
DEMAND RESPONSE:
If there is a silver lining to the high cost of energy, it’s lower demand. Industrial gas use fell 18% from 2021 levels, while residential heating demand fell 15%, according to BloombergNEF.
An increasing number homes also installed highly efficient heat pumps. Europe received some help from a relatively mild winter, which has lowered heating demand and helped to keep gas stockpiles at a healthy seasonal level.
Healthy Gas Stockpiles
Mild weather, LNG imports have helped keep inventory levels high
OIL:
While many companies have shunned Russian oil since the invasion, governments have been slower to follow suit, since the fossil fuel plays such a huge role in the global economy. The EU banned seaborne imports of Russian crude in December and petroleum products this month. There are also price caps in place on Russian oil to limit any profits that might flow to Russia.
In the meantime, the EU has increased its imports of crude from the US, Saudi Arabia and Norway. It’s also boosting its inflows of fuel from places like India and the Middle East.
Oil Is the Hardest Russian Fossil Fuel to Replace
The EU barely cut its oil imports from Russia last year
LOWER EMISSIONS:
Because of its longstanding focus on renewables and lower-carbon energy, the EU’s greenhouse gas emissions declined in 2022, though by less than 1%. To be sure, a mild winter has played a role. High energy prices also helped to curb industrial pollution.
Still, the bloc’s electricity from fossil fuels is set to drop by 43% this year, according to BNEF. And many of its incentives for clean energy haven’t really kicked in yet, the researcher said.
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