Energy Security in the EU: Responding to the Effects of the Ukraine Invasion

articulo_tecnico - 02/09/2023

On May 18, 2022, the European Commission launched the REPowerEU plan, detailing the actions to be taken to end dependence on Russian fossil fuels while also tackling the climate crisis.

We share the conclusions of the webinar of June 1, 2022: Energy Security in the EU: Responding to the effects of the invasion of Ukraine, organized by EsadeGeo Center for Global Economy and Geopolitics and Fundación Repsol:

Tatiana Marquez Uriarte, member of cabinet to EU Energy Commissioner Kadri Simon, engaged with a variety of stakeholders. Adolfo Aiello (EUROFER), Ana Álvarez, (Repsol) and Agata ŁoskotStrachota, (Centre for Eastern Studies) discussed the effects of the war on the EU’s energy security, the details of the REPowerEU plan, and to what extent the plan tackles three overarching challenges of energy policy: affordability of energy, reducing reliance on Russian energy, and accelerating the energy transition towards climate neutrality.

REPowerEU comprises a series of proposals, communications and guidance documents, based on three fundamental objectives:

Demand side: Saving energy through demand reduction and energy efficiency measures.
Supply side: Diversifying imports of fossil energy, cutting Russian gas consumption by two thirds by the end of 2022, and ending Europe’s dependence on Russian fossil fuels, in principle by 2027.
Accelerating the clean energy transition by proposing and facilitating stronger targets in renewable energy, renewable hydrogen, and biomethane.

Points of View

Tatiana Marquez Uriarte, Member of the Cabinet of Commissioner Simson, European Commission

Phasing out fossil fuels and decarbonizing the European economy are two goals which are very much interlinked; they mutually reinforce each other.
Significant coordination and energy solidarity among member states is necessary in preparation for the forthcoming winters. This includes updating member states’ contingency plans for curtailment scenarios when provision of gas is not guaranteed. The Gas Coordination Group, which serves to facilitate the coordination of security of supply measures, can facilitate this.
The establishment of the EU Energy Platform Taskforce on 25 May, 2022 to provide support to the EU Energy Platform, will work in three main areas:

Aggregating demand and determining how much energy is necessary in order to collectively reach out alternative suppliers and set agreements on volumes and reference prices.
Obtaining real-time data on the availability of gas transport infrastructure to ensure maximum efficiency of LNG terminal capacities.
Improving coordination in outreach to third country suppliers.

The Commission aims to attract third country suppliers by offering a double deal, as stated by Executive Vice-President Frans Timmermans: “first a short-term deal to provide us with the fossil fuel that we need, and then a long-term deal to incorporate them in a global system on the production and use of green hydrogen”.

Agata Łoskot-Strachota, Senior Fellow, Centre for Eastern Studies

The invasion has been a shock to the EU energy landscape. Until last year, Russia was a key supplier of energy resources to the EU, supplying 40% of European gas consumption and a third of oil imports. The EU is the biggest market for Russian energy exports: three quarters of Russian gas goes to Europe and over 50% of its oil exports.
EU has sanctioned Russian coal, and to some extent oil, but there is no real discussion on sanctioning Russian gas. Russia has nevertheless reacted to the EU and its Member States’ actions when it comes to gas, among others by demanding EU Member States to pay in rubles for gas imports.
The difficulties in agreeing on sanctions, different approaches by Member States, anticipated Russian retaliation, and general increased uncertainty in the market means continued high prices and volatility in the energy sector.
EU solidarity will be one of the key indicators of success for short and long-term structural changes to the EU energy system. If we fail in this respect, this may end up in greater fragmentation of EU energy policy.
It is also not evident how effective the common energy platform and voluntary joint purchases mechanism will be. Only Greece and Bulgaria are interested in using them up to now; but only if big players join will aggregated demand make a difference.

Ana Álvarez, Head of EU Public Affairs, Repsol

Energy supply and price imbalances experienced today, while exacerbated by the Ukraine war, are also due to the low investments in the oil and gas sector in recent years, in combination with the increasing CO2 price.
The challenge is to reach climate neutrality by 2050 while ensuring that consumers obtain their energy needs at an acceptable cost.
A number of issues warrant further attention in REPowerEU, including promoting low-carbon fuels and CO2 capture technologies, and respecting the principle of technological neutrality.
Further improvements can be made in the following three areas:

Energy savings: It is necessary to encourage efficiency investments in the hydrocarbon industry.
Accelerating hydrogen: The new hydrogen goal of 10 million tonnes of domestically produced hydrogen requires incentives for rapid deployment, including greater flexibility in the additionality requirements to consider what is defined as renewable.
Financial support: Use of the Recovery and Resilience Fund to finance REPowerEU, setting out new actions to meet REPowerEU objectives: there is an opportunity to explore new reforms and investments to support measures to reduce dependency on Russian fossil fuels.

Adolfo Aiello, Deputy Director General Climate and Energy, EUROFER

The European steel sector is one of the most energy-intensive sectors in Europe, the first manufacturing sector by emissions under the EU Emissions Trading System, and it is highly exposed to international competition.
The EU steel sector was already affected by the energy price spike before the Ukraine invasion, leading to production cuts and curtailment. The situation deteriorated due to:

The energy intensity of individual plants
The structure of energy contracts
Steel market dynamics

REPowerEU must balance a top-down assessment of what must be done due to the new geopolitical context and a bottom-up technical assessment of what can be done in the shortest time possible in order to increase the pace of investments.
On diversification of supplies, it will be important to improve the interdependencies across the EU rather than only diversifying from a global perspective. On the clean energy transition, the industry seeks a regulatory framework that will combine both ‘push’ and ‘pull’ measures. In other words, support measures that can create the business case for the implementation of renewable hydrogen.

Topics of debate

During the discussion, speakers shared their opinions on whether REPowerEU provided the tools to address three key energy challenges of energy policy: affordability of energy; reducing reliance on Russian energy; and accelerating the energy transition towards climate neutrality. Further talking points revolved around implementing the necessary solidarity mechanisms for gas purchasing and contingency, whether there is enough renewable electricity and electrolyser capacity to produce 10 million tonnes of green hydrogen by 2030, and whether the days of cheap energy imports are over.

Next Steps

REPowerEU offers a detailed plan towards achieving independence from Russian fossil fuels in the short- and mid-term. At the same time, the plan aims to complement other mid- and long-term EU energy policy goals. For example, as part of the plan, the Commission has proposed several targeted amendments to existing directives such as the Renewable Energy Directive, the Energy Performance of Buildings Directive, and the Energy Efficiency Directive, which are all part of the Fit for 55 package of policies which serve to reduce net greenhouse gas emissions by at least 55% by 2030. Other proposals

such as the Commission’s permitting package intend to shorten the permitting procedures for renewable energy production projects. These proposals and amendments are expected to be adopted in the coming months.

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Event - 29 Oct 2024

Energy Transition
Regulating energy transition
Challenges posed by climate change and energy transition

Cambio climático y crecimiento, un hueso duro de roer

Climate change and growth, a tough nut to crack

There is a broad scientific consensus that we are witnessing global warming forced by the greenhouse gases emitted into the atmosphere by human activity. Based on this evidence, young people worldwide have mobilised to demand more facts and less rhetoric and posturing from political leaders. They are not without reason, and their protest has gained a great deal of social support. The time for action has come, but are we aware of the nature and true scale of the challenge ahead?

The first step to solving a problem is to formulate it correctly. And to this end we must have present that the CO₂ emitted by human activity is related to four variables, considered on a global scale: 1) the population; 2) GDP per capita; 3) energy used per GDP unit (or energy intensity); and 4) the CO₂ emissions emitted per energy unit consumed (or carbon intensity). From the figure resulting from the multiplication of these four factors, we must subtract the amount of CO₂ that once emitted, we can remove from the air, either by natural means (for example, by avoiding deforestation and encouraging reforestation) or artificial means (using diverse engineering techniques, more or less developed and costly) that would allow CO₂ to be removed from the air and subsequently reused within the framework of a circular economy scheme.

This leads us to recognise two major components, of a very disparate nature, in the phenomenon of global warming. On the one hand, the first two factors (population and GDP per capita) are related to the current socio-economic model, which postulates unlimited demographic and economic growth, while the last two (energy intensity and carbon intensity), together with the component of removal and use of CO₂ emitted, are related to a certain energy model and level of technological development that make the objectives of demographic and economic growth possible.

We are, therefore, facing a systematic challenge, whose solution would require not only influencing (as is commonly believed) energy and technological aspects but also the current socio-economic model. A theoretical approximation that clashes with a harsh reality: the global demographic and economic trends point to continued growth in the next few decades.

In demographics, the world population is expected to reach 9.144 billion people in 2040, compared to 7.421 billion in 2016. Another particularly striking figure of these forecasts is that in 2040 64% of the world population will be concentrated in urban areas, compared to 54% in 2016; a percentage, the former, which may exceed or approach 80% in regions such as North America, Central and South America, and the EU, as well as in countries such as the US, Brazil, Russia, and Japan. We find ourselves before a process that adds to the global urban population a city the size of Singapore every four months.

And in terms of global economic growth, an average compound annual GDP growth rate of around 3.4% is expected for the period 2016-2040, with the highest growth rates concentrated in Africa (4.3%) and above all in the Asia-Pacific region (4.5%), and the lowest in the industrialised OECD countries. Another interesting element linked to the global economic growth is the forecast that the middle class will expand globally, increasing around 80% by 2030 and surpassing 5 billion people, with the majority of said growth coming from countries not part of the OECD.

Faced with the difficulty of reversing such trends, the international community has decided to focus on a new energy transition capable of decoupling economic and demographic growth from rising energy demand and greenhouse gas emissions. To achieve it, we have three tools: efficiency, decarbonisation, and removal and use of CO₂. However, the global data in 2018 show that the sum of actions in these three areas has not even been able to stabilise emissions compared to 2017. The emissions continue to increase, driven by economic and demographic growth. And if that weren’t enough, in the absence of disruptive scientific and technological breakthroughs, the energy transition is unlikely to be as smooth and fast as would be desirable.

Article published in El Periódico.

Opinion article - 02/09/2023

Challenges posed by climate change and energy transition
Strategy

La transición energética requiere desacoplar crecimiento del aumento de las emisiones de dióxido de carbono, avanzar hacia la descarbonización de la economía e invertir en tecnologies y energies renovables

Energy transition. What is it?

We hear a lot about energy transition. But almost always with excessively specific or very partial approaches. It is therefore worth reflecting on the meaning of the concept in its broadest sense.

There is now a broad scientific consensus that since the industrial revolution, and particularly since the mid-20th century, humans have forced global warming beyond natural climate cycles. This means that the time has come to find ways to "regulate the thermostat" using our ingenuity and cooperative skills. The question is how. To answer this question, it is important to remember that the first step in solving a problem is to formulate it correctly. In this regard, it should not be forgotten that global warming is related to three main groups of factors: 1) socio-economic (demographic and economic growth); 2) energy model (energy intensity and carbon intensity) and 3) amount of CO2 that once emitted can be removed from the atmosphere by natural and/or technological means.

From this perspective, it is clear that global warming is an unexpected dysfunction of the current socio-economic model, of the energy model that sustains it, and of our level of technological development that prevents us from remedying the problem satisfactorily and urgently. We are facing a systemic challenge and we have to ask ourselves what we can do about it. On the one hand, we know that focusing our action on socio-economic factors is unrealistic, but on the other hand, future projections tell us that demographic and economic growth trends will contribute to increasing greenhouse gas (GHG) emissions, i.e. worsening global warming. So we have no choice but to try to compensate for this deterioration through a radical improvement in the energy model and significant, disruptive advances in technological innovation.

The energy transition therefore entails: 1) decoupling demographic and economic growth from the increase in CO₂ and other GHG emissions; 2) moving rapidly towards a low energy intensity (efficient) and decarbonised economy (driven by a low carbon mix); and 3) deploying, on a large scale, technologies that enable the removal and reuse of carbon from the atmosphere, fostering a circular CO₂ economy to convert, after economic valorisation, current waste into a resource.

An epic task that requires a grand pact or coalition, based on science and technology, including governments, financial institutions, investors, companies, and all social sectors and citizens committed to the fight against climate change.

Article published in La Vanguardia.

Opinion article - 02/09/2023

Challenges posed by climate change and energy transition
Decarbonization
Strategy