Ukraine crisis shows our security demands a massive clean energy boom.
But Putin's war will boost near-term coal & fracking
The bitter reality that Europe is funding Putin's horrific invasion of Ukraine with every click of the heating coming on is forcing critical conversations about cutting off Russian gas supply. The potential need to do so immediately is clear. Putin's hydrocarbons are the lifeline of his invasion; perhaps his last line of economic defence in withstanding sanctions from the international community.
Even if the gas keeps flowing, prices have rocketed to such a degree that UK households face certainty of sky-high fuel bills. Six million may be pushed into fuel poverty. The way European governments have dragged their feet over the deployment of clean energy and home insulation has left families exposed to this crunch. If the UK had installed 1.8m heat pumps instead of 1.7m gas boilers over the past two years, we could have completely removed the need for any Russian gas imports whatsoever, Oxford University’s Jan Rosenow tweeted. Without David Cameron's ban on onshore wind farms, we would have avoided gas demand more than the total amount we get from Russia.
Next week the European Commission is expected to propose a new energy security strategy centred on ending reliance on Russian gas, with a massive expansion of green energy at its heart paid for through a potential tax on the windfall profits of giant gas companies. Biden used his State of the Union speech to spotlight America's clean energy expansion plans. The world's largest asset manager, Blackrock, predicts the crisis will accelerate the energy transition.
Deploying more renewable energy will suck inflationary pressures out of the system by removing the fossil price volatility that is doing so much harm to households and businesses here and around the world. Back when energy prices spiked in the run up to the Global Financial Crisis, solar and wind were more expensive options, but now to deploy these technologies is to roll out the cheapest available source of supply, and one that no single country controls. Nobody grips the wind like Putin grips gas supplies.
“Renewable energy is freedom energy” exclaimed Germany's Finance Minister, as he pledged to double down on clean energy as a new national security priority. Meanwhile, Germany's Minister for Economic Affairs signalled his intention to follow the UK in ending gas boiler installation, saying "Installing new gas heating systems in this situation is politically wrong and no longer justifiable". The German government is also reportedly revisiting the decision to close its nuclear plant early. (The industry has advised this may not be doable in the short-term, but this is disputed.)
Here at home, we’re hearing a similar message. "Now is the time to reduce our exposure to Putin's malign influence on gas markets by generating cheaper, cleaner power at home, and helping our European allies move away from Russian oil and gas," Energy Minister Kwasi Kwarteng told a meeting of global energy ministers this week. The UK may only get 4% of its gas from Russia, but the energy price crisis and geopolitical crisis are sharpening the case for going bigger sooner, and exposing Steve Baker's 'Net Zero Scrutiny Group' for championing expensive gas. Net Zero targets require Britain to cut gas demand by 65% by 2035, and almost entirely by 2050.
Despite this clear and positive strategic direction on energy policy, and although wind farms can be built within two years (if burdensome planning restrictions are addressed), new emergency energy strategies are unlikely to cut emissions in the short-term. Freedom from fossil fuels through home-grown low-carbon sources is the surest route to long-term security, but the immediate political imperative is to firm up energy supply from any source possible. As Jason Bordoff, a former adviser to President Obama on climate and energy issues, accurately predicted last month, "If climate ambition comes into tension with energy reliability or affordability or the security of energy supplies, climate ambition will lose."
This is why short-term we can expect more coal-burning in Europe, but also right around the world, as reflected in the surging price of coal. Given a large majority of coal burned in Europe is from Russia, gas-to-coal switching would continue to send revenues to Putin, unless governments start to source it from elsewhere (an idea suggested by Poland), and something some countries are already doing precipitating a big jump in demand from other coal mining places.
Perhaps the biggest jump in coal-burning may be seen in emerging economies like Turkey, Thailand, Malaysia and China, which are especially sensitive to imported gas and have large coal fleets. However, given how expensive coal is becoming, these countries are effectively faced with a dilemma like choosing whether to burn champagne or caviar, which is underlining the relative attractiveness of cheap renewables instead. Whilst there may be an impending global coal spike short term that will obviously be a blow to emissions reduction efforts in such a crucial decade on climate change, and following what was a first-time agreement at COP26 to "phase down" coal use everywhere, this in turn may end up also driving forward the clean energy transition.
Despite warnings from the International Energy Agency that new oil and gas licences anywhere would be inconsistent with keeping global temperature rises to 1.5C, the invasion of Ukraine will also likely precipitate a renewed political commitment to ramping up gas production from domestic sources in Europe as well as North America and Africa.
As we are seeing, gas imports from outside Europe are very expensive given China, Japan, Korea and much of the rest of Asia are competing for them too. (Seemingly India and Pakistan both appear content to seek more Russian gas for now, helping to explain their broader positioning towards the war.) But, putting aside the climate imperative, the sheer costs involved in further stretching our dependence on these imports underlines the economic logic of investing in cheap renewables at home. In practical terms, it's not clear the infrastructure exists to pipe LNG from ports to every part of Europe anyway. EU leaders will also be nervous about the security of depending on future US imports in the event of a second Trump term.
Combined, the coming coal and gas bump is likely to intensify calls to ramp up financial assistance to help poorer countries industrialise using cleaner energy sources (along the lines of the South Africa deal agreed at the Glasgow Summit) but this will be challenging in a context of even greater fiscal pressures in the West. We can only be glad that in most of the world renewables are the cheapest energy option now anyway.
At home, no one is arguing we should switch off existing gas supplies in the North Sea, but new licences would take decades to make any kind of difference. It takes on average 28 years to go from discovering a field to getting any gas out of the ground, according to official figures. And the reality is there isn't much gas left in the North Sea. The CCC estimates that extracting all proven UK reserves and resources from new fields would only meet about 1% of European gas demand each year to 2050.
Similarly, even if the renewed calls to frack in Sussex, Lancashire and Scotland were heeded in spite of public opposition and environmental concerns, the UK Energy Research Centre - the UK's leading independent energy academics at a network of British universities - concluded that production of this shale would be "unlikely to be of sufficient scale to significantly reduce the UK's import dependence or to have a significant impact on UK prices."
Whatever happens next in the tumultuous energy markets, it’s clear that Putin's war crime may prove to also be a key historical turning point for the trajectory of unfolding climate change.