Is the Russian energy crisis an energy opportunity for Europe?
It is a well-known fact that the world has been struggling with an energy crisis for several months now. The war between Russia and Ukraine and the associated concerns about Russian oil and gas supplies have deepened this sentiment. This has led to a further increase in the prices of these commodities on the capital markets. However, each coin has two sides, and this situation can also be seen as an opportunity for Europe. Why?
Given the European Green Deal, which aims to ensure that EU Member States achieve carbon neutrality by 2050, making Europe the first ever climate-neutral continent, it is logical that Russian gas and oil should be seen as a kind of transfer point on the road to achieving this goal. From this point of view, the war, which has been of primary interest to all investors since 24 February, could be the catalyst that speeds up the whole process of European states gaining independence from Moscow.
It won’t work without infrastructure
Naturally, a number of processes need to be set in motion to achieve this goal. First and foremost is the building of the necessary infrastructure to ensure the supply of energy and heat from new suppliers. This requires not only large investment, but also time. From this point of view, the current disruption in the supply chain as a result of the sanctions imposed by Western countries on Russia could cause huge complications for a whole range of sectors, not to mention a possible global recession. We have already seen the prices of oil and wheat, for example, climb to record highs. The war has also affected the transport and automotive sectors. The Goldman Sachs bank is keeping its outlook for oil prices to rise to USD 135 per barrel in the coming months. This is why addressing the issue of independence from Russia’s supply of key energy raw materials is becoming more and more urgent.
The transition to green energy
A logical step on the road to independence should be large-scale investment in renewable energy, given that part of the above-mentioned agreement is to ensure clean and affordable energy. The Investment Plan for a Sustainable Europe foresees the accumulation of investments of at least €1 trillion. Other sources of funding should include the Modernisation and Innovation Fund. 2020 was undoubtedly a landmark year for the European Union in terms of green energy, as it was the first time that Member States managed to generate more electricity from renewable sources than from fossil fuels.
Each country has a different energy mix
But the road to full carbon neutrality will be a long one. Each of the 28 states has a different starting position in terms of energy mix, as well as the position of renewable energy sources (RES) in it. The countries that use RES the most in Europe are Germany, Spain and Italy. Denmark is also a leader in solar and wind power generation, which enables it to meet up to 61 per cent of its annual consumption.
The Czech Republic and Slovakia lag behind in renewables
The Czech Republic and Slovakia lag behind other EU countries when it comes to the use of RES. Solar and wind power accounted for just under five per cent of their total consumption in 2020. Photovoltaic plants will only account for 2.7 percent of total production, although the real potential of both countries is several times higher.
To achieve the targets set out in the Green Deal, EU countries will need to significantly increase the share of energy produced from renewable sources over the next decade, while reducing their dependence on coal, gas and oil. Although this journey will be a long one, it can certainly be argued that it is heading in the right direction.
Commentary by Wonderinterest Principal Analyst Olivia Lacen