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