Can the European Union survive without importing Russian energy sources?
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Russia is the biggest exporter of fossil energy sources on this Earth. It exports gas, petrol, coal, uranium to the European Union. The EU could feasibly abandon Russian energy sources, but this commentary explains why such a move would be considerably more difficult to bring about in the case of gas.
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Various reports have recently examined this question. In the last few weeks, a report from the European Parliament has tried to make a synthesis of them and introduce new, interesting pieces of information.[1] This is a complex interrogation, of course, but the answer is quite simple. In a nutshell, the EU can do it, but not quickly, not cheaply, and not easily.
The topic is quite broad, since Russia is in fact the biggest exporter of fossil energy sources on the Earth. It exports not only gas, but also petrol, coal and uranium. This variety must be kept in mind when one considers the possibility of abandoning Russian energy sources. For good reasons, as we are going to see, analysts concentrate on gas. However, oil, coal and uranium remain.
For these resources, it is easier to find substitute providers. They can be easily transported, and they thus rely on world markets. This does not mean that such a substitution could happen instantaneously. New contracts must be concluded. Sometimes new financing must be found. New products must be transported. Sometimes power plants must be refitted. This can happen, but not always quickly, and not always cheaply.
The same constraints apply to the substitution of gas imports. There are in any case plenty of additional problems.
In the short term, the alternatives are quite limited. Imports from Norway cannot be scaled up drastically. North Africa is not very stable at present. Finally, increased liquid natural gas (LNG) use requires increased infrastructure (gasification plants and pipelines for further transport). Additionally, even if some alternative providers are found, their prices will most probably be higher.
In the short term, then, there is no possibility other than looking for energy sources other than gas. Each of these alternatives has its own problems (without even taking into consideration the fact that they also must be found anywhere but in Russia). Oil can be used, but it is more expensive. Nuclear power can be used but it provokes resistance in many Member States where there are no nuclear power plants. Renewables can be used but their integration has already generated huge problems in the energy single market. Finally, coal can be used, but of course it creates huge emissions of greenhouse gases. In the short term, however, the most likely solution is coal, with all its negative environmental consequences. This is not very attractive, especially for a European Union which enjoys presenting itself as the most climate conscious continent.
These scenarios, by the way, remain highly uncertain. In the European Parliament’s report, the best case scenario involves cutting all Russian gas imports, costs €3 billion, and is highly unlikely. The worst case scenario costs €15 billion and keeps Russian imports at 68 bcm (50% of the present volume).
Moreover, most studies tend to consider the question from a purely economic angle. The management of uncertainty will probably be more difficult. They are a lot of legal aspects which have not been covered by any study. Finding finance, modifying the power plants, negotiating new agreements (and sometimes getting out of the old ones) – all this requires not only money, but also time. This should be taken more closely into consideration.
In the long term, surprisingly, there are not so many broader alternatives. As far as gas is concerned, more LNG imports are possible, including those from the United States. But the quantities required will not allow LNG to be a game changer. Additionally, this gas will remain more expensive than the Russian gas. Iranian gas could also be an option. However, this requires (a) the end of pre-existing sanctions, and (b) either LNG infrastructures or a complete pipeline through Turkey. This will also cost a large sum, even with a long-term viable pipeline project. Importing Caucasian gas also requires pipelines… and political stability. For all LNG solutions, Europe will be in competition with Asian countries, which presently pay more for their gas. Shale gas is not a game changer either.[2]
In the long term, other sources remain problematic. Oil will most probably remain costly. Coal will most probably remain dirty. (Carbon sequestration systems have not progressed very much in recent years.) Nuclear power will remain controversial. And renewables will remain difficult to integrate, as we still see six years after the 2008 Climate and Energy Package.
In a nutshell, Russian gas is easy. The prices are interesting, the pipelines are there and in operation. In the short term, a full alternative is quite difficult to reach. Alternatives are not evident, sometimes being more polluting and certainly more costly. If there is an external shock, expect some disruptions, higher prices, and the straight reduction of consumption in industries and households. In the long term, a full alternative is possible – and should be prepared. But it will take time, money and reforms. Security must henceforth be placed higher on the energy agenda.
This crisis, however, has one strong positive aspect, and could even become a blessing in disguise. As has been repeatedly announced in recent decades, the European Union is becoming more dependent on external providers for its energy. This will not change, and will even accelerate in the forthcoming decades. There are other potential disruptions. Rising gas demand in Asia. A climate accident imposing the reduction of coal use. A political conflict in the Middle East that reduces its oil exports. A new Fukushima.
The basic problem remains. Europe needs a long-term strategy for a new, decarbonized energy system. Such a strategy can only have three real pillars: increased energy efficiency, more renewables, and more research. The 2030 action programme for energy, presently being examined by the European Council, needs stronger support from each of those pillars.
Tania Zgajewski
[1] See T. Zgajewski, Shale in Europe : much ado about little, Egmont Paper 64, 2014.
[2] Pasquale de Micco, In-depth analysis – The EU’s energy security made urgent by the Crimean crisis. (http://cdn1.vol.at/2014/04/Kommissionsstudie.pdf ).
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