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The clean hydrogen future has already begun

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There is a growing international consensus that clean hydrogen will play a key role in the world’s transition to a sustainable energy future. It is crucial to help reduce carbon emissions from industry and heavy transport, and also to provide long-term energy storage at scale.

Hydrogen is a versatile energy carrier that can be produced from a wide range of sources and used in many ways across the entire energy sector. It could become a game-changer in its low-carbon form, but its widespread adoption faces challenges.

The International Energy Agency is preparing a major new study to assess the state of play for hydrogen, its economics and potential. Due to be published in mid-June, the report will be a key contribution to Japan’s 2019 Presidency of the G20.

Researchers have found that clean hydrogen still costs too much to enable it to be widely deployed. Prices may not come down sufficiently until the 2030s, according to some estimates. But despite the uncertainty surrounding the future of clean hydrogen, there are promising signs that it could become more affordable sooner than expected.

Where the hydrogen comes from is important. At the moment, it’s mainly produced industrially from natural gas, which generates significant carbon emissions. That type is known as “grey” hydrogen.

A cleaner version is “blue” hydrogen, for which the carbon emissions are captured and stored, or reused. The cleanest one of all is “green” hydrogen, which is generated by renewable energy sources without producing carbon emissions in the first place.

CO2 emissions may make grey hydrogen more costly

At the moment, grey hydrogen is cheaper than the other two. Its price is estimated to be around €1.50 per kilo. The main driver is the price of natural gas, which varies around the world.

Too often, people assume that the price of grey hydrogen will remain at this relatively low level for the foreseeable future. That ignores the IEA’s projection of a structural rise in natural gas prices due to market forces. And more important, it fails to take into account the potential volatility of gas prices, as demonstrated in Europe, where they have become more linked to spot markets.

What’s more, grey hydrogen’s CO2 emissions carry a cost in an increasing number of jurisdictions around the world. In the European Union’s emissions trading system, the price of CO2is in the range of €20 to €25 per ton.

A growing number of European Union countries want to establish a minimum CO2 price that will gradually increase to around €30 to €40 per ton over the next 10 years. That means the cost of CO2 could eventually add almost €0.50 to the price of a kilo of grey hydrogen in Europe, bringing the total price to around €2.

In an increasingly carbon-constrained world, we should also not lose sight of the diminishing social acceptability of continuing to emit CO2 while producing and using grey hydrogen in industry.

Blue hydrogen can narrow the gap

The price of blue hydrogen is also mainly influenced by natural gas prices. But its second-most important driver is the cost of capturing and reusing or storing the carbon emissions.

Current estimates put the price of carbon capture, utilization and storage (CCUS) in the range of €50 to €70 per ton of CO2. The price is lower in specific cases like ammonia production .

This puts the current price of blue hydrogen in Europe a bit above the price of grey hydrogen, but that gap will shrink if the price of CO2 emissions increases further in the coming years.

Once the process of CCUS in blue hydrogen plants is scaled up and standardized, the cost is likely to come down.

Innovation should eventually open up more opportunities for utilization of CO2 in industry, which may further push down the cost of CCUS. Those developments could bring the price of blue hydrogen closer to that of grey hydrogen sooner than is often assumed.

Green hydrogen’s price depends on renewables

Different factors come into play for the priceof green hydrogen, which is estimated to be between €3.50 and €5 per kilo at the moment.

The first one is the cost of electrolysis, the process through which hydrogen is produced from water using renewable energy. Total global electrolysis capacity is limited and costly at the moment. Most industry experts expect that a significant increase of electrolysis capacity will reduce costs by roughly 70% in the next 10 years.

The most critical factor for the cost of green hydrogen, however, is the price of the green electricityused in the electrolysis process.

The cost of generating solar and wind energy has come down spectacularly in the past decade. That should prompt caution about what will happen to the cost of green hydrogen in the future. Similarly to wind and solar, it may come down a lot faster than experts now expect.

In countries and regions blessed with abundant sunshine and wind power – such as the Middle East, North Africa and Latin America – green electricity prices have come down to around 2 euro cents per KWh.

Experts expect them to decrease even more in the near future. Former US Energy Secretary Steven Chu recently suggested the prices could soon go as low as 1.5 US cents (1.3 euro cents) per KWh.

In those countries and regions, there is a real prospect of mass producing green electricity for domestic use – and also green hydrogen for both domestic applications and export markets.

Towards a global clean hydrogen market?

Green hydrogen can in principle be shipped around the world to places that are less well endowed with cheap renewable energy sources.

Japan has several important pilot projects underway – with countries including Australia, Saudi Arabia and Brunei – to determine the best way to transport green or blue hydrogen over large distances by ship.

It is too early to tell how the cost of transport will develop and how fast this global hydrogen market may develop. Depending on technological advancements, a market similar to that of liquefied natural gas may see the light of day in the decades to come.

What does all this mean for the cost of green hydrogen in Europe?

First, that it may indeed take more time for the cost of green hydrogen to come down to levels near those of grey and blue hydrogen. The scale-up of electrolysis needs to drive down the cost. Even more critically, mass production will require large volumes of cheap green electricity.

The projected scale-up in offshore wind production in Northwest Europe is expected to kick in over the next 10 to 15 years. By the early 2030s, mass deployment of green hydrogen may have begun in that part of the world.

Some big industrial players, like Engie, have set an explicit cost target for green hydrogen to reach grid parity with grey hydrogen by 2030. The Japanese government has also formulated stringent cost targets for clean hydrogen by 2040.

Those ambitions are long term, but they don’t preclude significant use of green hydrogen in the next few years. It’s already happening locally across Europe, where on-site wind or solar power units generate green hydrogen for applications in industry, transport or energy storage.

In a number of cases, creative companies have figured out sustainable business cases. Swedish power company Vattenfall has calculated that producing a €20,000 car from CO2-free steel (using green hydrogen) rather than regular steel would add just €200 to the price. That suggests premium markets could be developed for consumers willing to pay 1% to 3% more for products manufactured using green hydrogen.

Danish power company Orsted recently announced that its bid in an offshore wind auction in the Netherlands includes the production of green hydrogen for industrial use. That shows that new business models are being invented as we speak, raising the possibility of positive surprises ahead.

Shaping hydrogen’s future through policies

Energy policy can clearly make a big difference through measures such as minimum CO2 prices. Another important factor is the way in which the authorities can foster the energy transition.

The Dutch government has announced the broadening of its low-carbon program. At the moment, it’s restricted to subsidies for producing renewable energy, but it will soon be expanded to include all possible cost-effective ways to reduce CO2, including CCUS. This will help the market-driven activation of blue hydrogen projects and, depending on how costs evolve, hopefully that of green hydrogen projects in the near future.

France’s hydrogen strategy includes indicative targets for greening the current use of grey hydrogen in industry. The French government has set a target of 10% green hydrogen use in industry for 2022 and 20% to 40% for 2027.

A proposal from some industry players in Germany (Shell, Siemens, Tennet) aims to organise combined auctions of offshore wind fields for electrolysis, which would imply connecting the value chain in one single tender.

Zero emission standards for vehicles are increasingly popular in many cities and countries. They are a powerful driver of clean hydrogen applications in transport, where diesel and petrol are rapidly becoming less acceptable. This may help bring down the cost of electrolysis even faster.

Many current discussions in Europe also involve proposals such as an obligation to blend clean gas (including hydrogen) into the gas grids. This would help kick-start the clean hydrogen market in Europe, even if we begin at low levels.

Other important policy instruments include the doubling of R&D in clean hydrogen, as agreed in the Mission Innovation initiative; removing fossil fuel subsidies; guarantees of origin for blue and green hydrogen; favourable implementation of the European Renewable Energy Directive (REDII); common quality and safety standards; and aligned regulatory approaches on what roles different market participants can play in this new market.

We can expect to hear much more about policies to stimulate the creation of a single clean hydrogen market in Europe in the months to come. The clean hydrogen future has already begun.

IEA

Chairman of the IEA Governing Board and Hydrogen Envoy for the Ministry of Economic Affairs & Climate Policy, The Netherlands

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USA-KSA Energy War and Global Energy Crisis

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In this photo released by Saudi Press Agency (SPA), Saudi Crown Prince Mohammed bin Salman, right, greets President Joe Biden, with a fist bump after his arrival in Jeddah, Saudi Arabia, Friday, July 15, 2022. (Saudi Press Agency via AP)

The response of the USA to OPEC and its partner’s plan to reduce output by two million barrels per day was strong enough to suggest an uptick in hostilities with oil producers, particularly Saudi Arabia. Despite the fact that the decision was well anticipated, Washington saw it as a strong indication from its Gulf allies that they are not likely to comply with USA’s requests to continue oil production. In fact, it has started a war between the two major oil powers to make a serious impact on the energy regime. Hence the tug of war has an impact on the global energy domain since these two are the principal role player in the energy regime.

However, prior to the 2020 election, current US President Joe Biden urged to charge Saudi prince Mohammed bin Salman for the Jamal Khashoggi issue. The Trump era was quite friendly with the Saudi government. So, to confront Donald Trump Biden used the anti – Saudi stance in the 2020 election. Even the US government published a report on the issue after Biden was elected as the president. But the Ukraine war changed the landscape of global politics by introducing the energy crisis. To maintain a balanced price inside the USA, the Biden administration requested the KSA to put a bridle on the price. But despite having kept the USA’s urge the OPEC plus decided to hold the production of 2-million-barrel oil per day. It will help to move the price upward since the downward price of oil was alarming for the OPEC members. The rising oil price can determine the interim election in the USA. Hence the US responded strongly. But the KSA maintained its position. However, here the action of the two big powers in terms of energy will facilitate another round of energy crisis in the global market. The following portions will discuss the issue and what ramifications it will bring.

Strong Stance of the KSA

Suhail Al-Mazrouei, the energy minister for the Emiratis, stated to reporters following the Vienna summit that OPEC took action to assure that producers would continue to invest in new oil supply. “They have their own stories, too, in Europe,” he continued, “and in Russia. We cannot support either this nation or that nation. Moreover, Prince Abdulaziz bin Salman, Saudi Arabia’s energy minister, ruled out whatever political purpose and impliedly rejected the notion that the resolution entailed any hostility toward the US or other purchasers, claiming it was not done in defense of Russia. These portray that the KSA is not showing its intent in a hostile manner rather it wants to deal the tension through diplomatic channel.

NOPEC: Reappearing on the Set

The No Oil Producing or Exporting Cartels (NOPEC) bill will allow the U.S. attorney general to sue OPEC or its members, such as Saudi Arabia, in federal court. Other producers like Russia, which works with OPEC in wider group known as OPEC+ to withhold output, could also be sued.

The decision to reduce oil production, however, has already caused President Joe Biden to express his “disappointment,” adding that he would be exploring at “alternatives” to increase inventories. Hence, National Security Advisor Jake Sullivan and Director of the National Economic Council Brian Deese, two senior officials, issued a joint statement urging the White House to rethink its position and support the so-called NOPEC bill, which would hold the oil-producing cartel legally responsible for any price collusion.

Releasing Strategic Reserve: Not an Optimistic Option

The Biden administration’s alternative choice is to increase the amount of oil that is released from the strategic reserve, which is currently at its lowest levels since 1984. A previously stated release of tens of millions of barrels had no effect on the market, but further releases could lead to a supply surplus that would support further OPEC production cutbacks.

The Russia Factor

Washington commentators spouted accusations of Saudi Arabia “siding with Russia” after the OPEC+ announcement of relatively small production cuts. In a statement, the Saudi foreign minister revealed that the U.S. asked OPEC+ to delay announcing its production cut by a month and said that he rejects such “dictates” from Washington.

Moreover, according to OPEC, the decision is simply technical and for maintaining market stability. However, the US administration was enraged because Alexander Novak, the deputy prime minister of Russia and minister of energy, was present at the OPEC+ summit in Vienna. According to sources at OPEC, the US attempted to exert pressure on Austria to forbid his attendance, but OPEC+ members vowed to relocate the organization’s headquarters from there if its integrity was not upheld.

According to analysts, rising oil prices prior to a price cap would be advantageous for Russia, the largest non-OPEC producer. At least the discount starts at a higher price level if Russia is forced to sell oil below market value. Early in the year, high oil prices somewhat offset the sales Russia lost as Western consumers avoided its supplies. Additionally, the nation has been successful in redirecting almost two thirds of its traditional Western sales to buyers in nations like India.

However, as oil prices and sales volumes dropped, Moscow’s revenue from oil decreased from $21 billion in June to $19 billion in July to $17.7 billion in August, according to the International Energy Agency. The price limitations would further undermine a significant source of income since oil and gas revenues account for one-third of Russia’s federal budget.

Ramifications: “Weaponization of Oil”

The world will experience a surge in demand for oil. Besides, the global politics will divide into two separate blocs, though already the polarization is vivid enough. There are other ramifications of the war.

Firstly, The Biden administration plans to “re-evaluate” America’s eight-decade-old alliance with Saudi Arabia because of last week’s OPEC+ decision to cut oil production. But the White House posturing looks like a bid to distract from the effects at home of Washington’s failure to pursue a successful transition to clean energy.

Immediately following the OPEC+ decision, Roger Diwan, an analyst with S&P Global Commodity Insight, claimed in a note that the cuts represented a “weaponization of oil” and that the meeting’s timing and location were an intentional signal: The deputy prime minister of Russia, who is subject to US sanctions, was present to discuss limiting the oil supply as winter approaches and Russia has already militarized its gas deliveries to Europe. The confrontational course taken by Saudi Arabia will increase the price risk for oil.

Secondly, a shift in the gulf’s policy domain will be experienced. Some in the US perceived the decision as a failure of Biden’s Gulf policy because it was taken just over two months after Biden’s meeting with Saudi Crown Prince Mohamed bin Salman in Jeddah. The ruling Democratic Party was anxious about the Congressional midterm elections in addition to the conflict in Ukraine and the economic sanctions against Russia. With opinion surveys indicating that Republicans might win majorities in both the House and the Senate, high gas prices at the pump only worsen their already bleak prospects.

Thirdly, Saudi Arabia’s energy minister cautioned in a deliberate response to the American response that US-led plans for a price ceiling on Russian shipments are fanning the uncertainty that prompted OPEC+ to its largest output cut in two years. The perception that the next two months would be “a period of uncertainty” is increased by “the lack of details and the lack of clarity” regarding how the price ceiling will be put into place. People have no idea how the market or the participants would respond.

Fourthly, according to some Gulf sources, the “strategic alliance” between the US and Gulf nations will prevent the situation from turning into a full-blown energy crisis. They even assert that everything will “cool off” following the midterm elections later this month.

Sixthly, the USA will search for alternative sources in the African region for maintaining supply-chain of oil and gas. The visit of Biden to the African states was a sign of newer sources to ensure the security of commodities like oil.

Finally, the energy war is empowering the movement for renewable energies facilitated by the USA inside and outside the USA. The initial election mandate for the US president was to enable more renewable energy sources.

Moreover, higher oil prices will unavoidably exacerbate the inflation problem that central banks around the world are trying to solve, and they will affect the decision to raise interest rates even further to slow down the economy. That might increase the price of gasoline globally and intensify an energy crisis in Europe and the rest of the world that is mostly related to Russian reductions in natural gas supplies used for heating, electricity, and manufacturing.

In the end, it is a reality for the developing and underdeveloped nations, that they will suffer the most. Reserve shortage, high inflation, high food price, and a prolonged energy crisis are what they might expect from the situation.

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Russia-Turkey: Gas partnership as an answer to Western sanctions

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In early November, the European Union extended for the umpteenth time its sanctions against Turkey for another year for Ankara’s allegedly illegal exploration of gas fields off the coast of Cyprus.

The EU is understandably obliged to protect the interests of its member nations, in this case, of Greece and Cyprus, but I believe that this latest move by Brussels should be viewed in a broader context. The issues of extraction, transportation and supply of natural gas have already acquired a distinct political dimension in the world.

“We could move the lost volume of transit through the Nord Streams along the bottom of the Baltic Sea to the Black Sea region … by creating the largest gas hub for Europe in Turkey, if, of course, our partners are interested in this,” Russia’s President Vladimir Putin said, when addressing the plenary session of the Russian Energy Week International Forum. His Turkish counterpart enthusiastically accepted the offer.

Notably, the “gas” issue has more than just economic or political significance for Turkey. It has also become a sort of a metaphysical symbol of its success in the international arena. Ankara has long outlined its goal of becoming a major transportation hub, and if possible, the seller of natural gas to Europe, and is working hard to make this happen. Right now, there are seven main gas pipelines running through Turkish territory, four operational LNG terminals, and the country’s own gas fields in the Black Sea that are being actively developed by Turkey, which plans to put the first of these gas fields into operation within a month.

Not everyone believes the Turkish reports about the “huge reserves” of natural gas in the country’s territorial waters, though. Some skeptics even joke that Gazprom will lay a pipe to these fields, and BOTAŞ (the Turkish analogue of Gazprom) will simply latch onto it.

Meanwhile, in an interview with TRT Haber, Turkish Minister of Energy and Natural Resources, Fatih Donmez, said that “in the event of an increase in demand, Russian gas alone may not be enough.” Therefore, Ankara is currently in talks with other suppliers of pipeline and liquefied natural gas in the Middle East, North Africa, Central Asia and even Southeast Asia – about half a dozen in all. Given this vast geography, the logistics of supplies will be fairly complicated though, but Ankara’s plans to hold a conference with potential gas suppliers for the proposed hub early next year proves the seriousness of its intentions.

By implementing this project, Ankara expects both to receive relatively inexpensive gas and also payment and even commissions for the sale of Russian fuel to the European market. And of course, Turkey would not be Turkey if, just days following President Putin’s abovementioned  statement, the country’s Treasury and Finance Minister, Nureddin Nebati, did not reiterate its request for a discount on Russian gas and for a deferral of payments for its supplies.

Meanwhile, Hungary and Serbia continue to buy Russian gas, while the European Commission has officially banned its purchases – politics in the West today prevails over the economy. At the same time, many countries are willing to purchase Russian gas, but subject to the observance of “sanction propriety,” and the proposed hub where gas from different suppliers will inevitably be mixed, will help observe this “propriety.”

As for Turkey’s relations with Western allies, both the US and the EU have repeatedly and persistently invited the Turkish leaders to join the anti-Russian sanctions, which is something Ankara has so far carefully avoided.

Almost a week after Putin and Erdogan agreed to set up this hub, US Assistant Secretary for Terrorist Financing and Financial Crimes Elizabeth Rosenberg visited Ankara and Istanbul to discuss “a range of topics, including the sanctions and export controls imposed on Russia by a broad coalition of over 30 countries, energy security, anti-money laundering policy, and countering the financing of terrorism. These meetings affirmed the importance of close partnership between the United States and Turkey in addressing the risks caused by sanctions evasion and other illicit financial activities,” the US Treasury Department said.

Starting from June, US Deputy Treasury Secretary Wally Adeyemo and European Commissioner for Financial Services, Financial Stability and Capital Markets Union Mairead McGuinness traveled to Turkey with approximately the same agenda.

At the same time, Washington and, at its suggestion, Brussels are ramping up economic pressure on Ankara, above all on its banking sector. As a result, Turkish banks were forced to refuse to service Russia’s Mir cards, periodically returning payments in dollars and euros to Russian payers, even if they go via correspondent, almost entirely Western banks. There is always a way out though, and work is now underway to resume accepting Russian bankcards, and payments are easily made in rubles. Such transactions are not tracked by financial regulators in the United States and Europe.

As for Ankara itself, it has its own means of counteracting this. Europe has fresh memories of Recep Tayyip Erdogan once opening the “gate” for hundreds of thousands of Asian and African migrants, and due to the “obstinacy” of the Turkish leader, NATO is still unable to take in Sweden and Finland.

Turkey, like probably no other country in the world, is interested in maintain sustainable economic ties with Russia. Therefore, it is safe to assume that it will continue to resist pressure brought to bear by the Western allies, even if at times it comes under their “friendly fire.”

From our partner International Affairs

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Evaluation of Germany’s Reaction to The European Energy Crisis

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The Russo-Ukrainian crisis, which started on 24 February 2022, brought war back to Europe. This war has visibly impacted the energy nerve of Europe as Russia is the primary exporter of energy, for – Liquified Natural Gas (LNG), oil and solid fossil fuel. Germany, in particular, had maintained a pro-longed diplomatic front in a bid to continue its energy trade which is largely dependent on Russia. Europe’s dependence on LNG and oil imports from Russia has highlighted the need for Europe to diversify its energy trade. The attack on Ukraine by Russia has invited several sanctions against the latter, together with steering the discussion towards the urgent need to branch out in the LNG and oil global supply market. Similarly, in the context of India, there might be some lessons to draw to prevent such a situation which might arise due to the concentration of the energy trade from only particular countries.

The pursual of NATO membership by Ukraine, an erstwhile Soviet state, and the refusal of western states to adhere to Vladimir Putin’s demand to bar Ukraine and other post-Soviet states from being included within NATO, are central to spurring the Ukrainian Crisis. After Putin recognised “the non-government controlled areas of the Donetsk and Luhansk oblasts (administrative regions) in Ukraine as independent entities and sent Russian troops into these areas,” he launched his military invasion of Ukraine on the aforementioned date. Following the invasion, the European Union (EU) imposed several restrictive measures and economic sanctions against Russia and her allies. However, Europe too is feeling the ripples of these sanctions, as the EU depends on Russia for almost 40 per cent of its total gas consumption, and it “accounted for around 45% of the EU’s gas imports in 2021 and almost 40% of its total gas consumption.”

The case for European Energy Diversification

The EU is one of the largest importers of natural gas globally.  The case for diversifying energy dependency is more specific to certain European countries, particularly Germany. The post-World War II German idea of pacifism is a prudent attempt at maintaining peace and cooperation in the region. Germany has been a strong advocate of relying on diplomacy to resolve any conflicts in the area. An example of this is the visit by German Chancellor Olaf Scholz to Russia on 15 February 2022, to attempt to negotiate a diplomatic solution between Russia and Ukraine. His visit aimed to revive the Minsk Agreement, where Germany had participated at the negotiations table along with France, Russia and Ukraine. This however, was unsuccessful as Russia was not keen on any talks regarding the situation. Further, even domestically, Scholtz was met with criticism for his inability to negotiate a deal. The leading LNG suppliers to Germany are “Russian piped gas led imports  at 32 percent followed by Norway at 20 per cent and the Netherlands at 12 per cent.” Germany’s LNG imports are used in heating homes, industries, manufacturing, as fuel, and to generate 15.3 per cent of its electricity in 2021, as per the German Association of Energy and Water Industries (BDEW).” It is hence a crucial step to look toward diversifying the source of fossil fuel requirements for Germany and other European states, away from Russian shores. Among the other EU member states, Italy is in the second place when it comes to dependency level on the Russian gas supply as it buys “about one-quarter (24 percent) of Russia’s total natural gas exports worth $5.8bn.”

For Europe, especially Germany and the other countries most dependent on Russian energy imports, part of the answer will be to stop looking north in Russia’s direction and start looking south to Africa. As the United States and other EU countries continued to impose increased sanctions on Russia as well as provide weapons and tactical support to Ukraine, Germany had been remarkably non-committal on offering military assistance. German Chancellor Scholz continued to reiterate that his country’s foreign policies were attuned with those of Europe and the NATO, but also prevented third party countries like Estonia from supplying German-origin weapons to Ukraine. Scholz held that Germany would never favour providing lethal weapons to other countries. The common public and the domestic opposition heavily criticised Scholz for this perceived diplomatic failure

However, focused international pressure from the global West to act more proactively has compelled Germany to make a U-turn in their policy regarding Ukraine. It declared his decision to suspend the Nord Stream 2 gas pipeline in the Baltic Sea, that “is owned by a company in which the Russian state has a controlling stake. Additionally, Germany Chancellor Scholz announced that “$113bn (£84bn) for the German army” and committed to meeting the target of NATO military spending of 2 per cent.  The German government also announced that it would send in “1,000 anti-tank weapons and 500 Stinger anti-aircraft defense systems to Ukraine.  [It also] authorised the Netherlands to send Ukraine four hundred (400) German-made rocket-propelled grenade launchers, and asked Estonia to ship over nine Howitzers.” Besides increasing military spending, Germany also sided with the European Union’s decision to suspend seven Russian banks from the SWIFT messaging system for global financial transactions, baring the ones associated with energy, from the SWIFT messaging system for global financial transactions. The Polish Prime Minister was critical of this decision by the EU to exempt Sberbank and Gazprombank from sanctions. Although China and Russia have set up their own alternative platforms, around 70 per cent of the transactions continue to be conducted through the SWIFT system. 

Alternate or Plausible avenues of energy

The International Energy Agency (IEA) came out with the “10-Point Plan to Reduce the European Union’s Reliance on Russian Natural Gas” which highlighted, among others, not signing newer contracts with Russia; looking for newer suppliers; alternate sources of energy; and opting for low-emission, clean and efficient alternatives, like nuclear energy and wind energy. The adoption of energy efficiency measures was also suggested in homes and industries. These objectives are in line with the EU Green Deal to reduce emissions in the future. 

Over the course of the unfolding Ukrainian crisis, Europe’s reliance on its energy trade from Russia might face numerous threats. Any sudden halting of the LNG pipelines would be catastrophic for the German economy.  The primary pipelines, originating from Russia, on which Europe depends are the “Yamal-Europe, which crosses Belarus and Poland to reach Germany, and the Nord Stream 1, which goes directly to Germany via the Baltic Sea.” 

Source – US Energy Information Administration

In the case of France, it derives less than 20 per cent of its energy needs through LNG, with nuclear energy alone constituting 70 per cent. As the dependence on the energy trade with Russia through LNG pipelines is under the international community’s close radar, pressure has been building on Europe to diversify either its source of energy supply or look at alternate sources of energy because of the sky-rocketing prices. The US ban on Russian oil imports and subsequent calls of diversifying and phasing out oil and gas imports from Russia, all amidst the Ukrainian crisis, has affected the sharp climb of energy prices. There is also the fear of Russia closing the fuel pipelines as a reaction to the sanctions against it, as well as the military support provided to Ukraine. While addressing the German Economic Minister Robert Habeck, Stefan Liebing, the chair of the German-African Business Association, urged Habeck to consider exporting LNG from “African countries such as Algeria, Nigeria, Egypt and Angola, which could help free Europe from its dependence on Russian gas.” Algeria is a major supplier of LNG to Europe, with substantial reserves. It supplies Italy and Spain through its undersea pipelines and has an LNG terminal. From there, natural gas could be transported to Germany via pipelines. The Libyan gas field are another source of energy supply connected to Italy. There has been talks to develop the Eastern Mediterranean Pipeline Project to supply the required energy from offshore gas fields of Italy to Europe.

Source – Deutsche Welle

The major natural gas reserves lie with Nigeria, which contains about a third of Africa’s reserves. The Trans-Saharan pipeline, which could supply around 30 billion cubic meters of gas from Nigeria, is “equivalent to about two-thirds of Germany’s 2021 imports from Russia”. It has been proposed to join the existing LNG pipelines such as the “Trans-Mediterranean, Maghreb-Europe, Medgaz, and Galsi pipelines that supply Europe from transmission hubs on Algeria’s Mediterranean coast.” The Maghreb-Europe Gas Pipeline in Algeria “conveys natural gas through Morocco to Spain and Portugal, and the Medgaz pipeline links Algeria directly to Spain.” However, the operationalisation of the Trans-Saharan pipelines, which are still in the initial stage, would take some time to fill the energy gap for Europe in the short run. Alternatively, Nigeria holds around 200 trillion cubic-foot reserves of gas and is a great option for exporting gas to Europe. This energy rush has led to a subsequent worldwide increase in the price of goods and delays in the supply chain.

Europe also relies on shipping for LNG imports from West Africa.  Yet, in the case of Germany, it doesn’t have any LNG import terminals. Similarly, LNG loading ports with floating liquification plants can be used to transport offshore gas to LNG tankers, such as in the Greater Torture Ahmeyin field. African states with huge gas reserves also see the opportunity of widening the energy market to “fill the gap of around 150-190 billion cubic metres caused by the Russian energy.” It is also important to secure the energy supply from terrorist activities and violence caused by armed groups in the region, which leads to insecurity and instability in supply. An example of this is Mozambique, in the Cabo Delgado area, that has deep reserves of gas. The importance of security of supplies was reiterated by the Economy Minister of Germany, Robert Habeck, who also signalled the necessity to diversify resources and has delayed Germany’s plan to go carbon neutral, by looking towards nuclear energy and coal.

Additionally, the Southern Gas Corridor (SGC), which had been initiated by the European Commission, would be linking the Caspian Sea to markets in Europe, and aims to increase and diversify European energy supply.” It was stated to be capable of supplying 10 billion cubic meters (bcm) by the end of 2020, which had the potential to be expanded later. Similarly, other gas pipelines connecting Central Asia and the Mediterranean region are “the Trans Anatolia Natural Gas Pipeline (TANAP) and the Trans-Adriatic-Pipeline (TAP) to transport gas from Azerbaijan to Italy via Georgia, Turkey, Greece, Albania and the Adriatic Sea, by listing them on the PCI [Project of Common Interest] lists.” 

The United States of America has proposed to relax sanctions on Venezuela to open up alternate routes for energy trade. Qatar has also been identified as a supplier of energy to Europe. However, Qatar has clarified that it is operating presently at full operational capacity limit, and thereby cannot replenish the complete requirement of European countries who previously traded with Russia for gas. Hence, this makes the diversification of the energy needs of a country more significant. 

Even within the EU, the stress has been on expanding the supply of energy and building new LNG terminals and interconnectors. The rise in LNG supply prices has led to unintentional stress in the shipping industry, as it has also brought global production outages and shipping delays. LNG cargoes headed for Asia through the maritime routes have been rerouted to European ports to cater to consumers willing to shell out a larger sum, amidst the surge in gas prices. This has also led to stockpiling of LNG resources to prepare for the next winter in Europe, where gas is crucial in heating homes. Shell and Total, the leading gas and oil agencies, have been working on regularising the flow of gas tankers from the US, Nigeria and Qatar, towards Asian markets. This is because Europe is well connected by LNG pipelines and can be substituted, when necessary, with cargoes from other sources. Besides, Japan and South Korea are the major importers in the Asian market, and Japan makes use of LNG to meet the energy gap from nuclear energy production.

LNG imported through LNG terminals is manner of diversification from pipelines.  Furthermore, the European Commission had presented the EU Strategy for LNG and gas storage in 2016, which talked of improving energy security and diversification of sources of supply. But due to the limited supply by Russia, Europe had lesser storage of gas even in the winter months. A limitation of this is that there can be only a finite amount of storage to be kept in contingency for the next winter. In the case of Germany, the German President, while addressing the German Parliament, revealed that Germany would increase their gas storage capacity up to 2 bcm and would import gas in coordination with the EU.

As gas imports have gradually reduced, in addition to the sabotage on the Nord Stream 1 pipeline in September, Germany has opted to diversify its energy resources. European LNG-dependent European states have started concentrating on other avenues for energy generation. Wind energy and solar energy are seen as promising alternates to LNG and oil, though with the caveat of being dependent on weather conditions. However, these would require an ample amount of energy backup. The usage of coal for power generation purposes has been proposed as an option to decrease the dependence on Russian energy. Despite coal being known as the dirtiest fossil fuel, there has been the push towards its usage for electricity generation.  In the short term, it is seen as a viable option to substitute the continent’s gas needs. Russia has also been the biggest supplier of coal to Europe, nudging states in Europe towards Colombia, South Africa, Australia, Indonesia and the U.S. Despite the sanctions being imposed, shipments of coal from Russia were still being sent to the U.K., Germany and Latvia. 

Nuclear energy is another alternative energy generation method which Europe could expand on, and in 2022 it accounted for 24.6 per cent of electricity produced in the EU. Europe has pledged to phase out the dependence on Russian energy imports by 2030 according to the Versailles Declaration, and to develop “three key dimensions: a) Bolstering […] defence capabilities; b) Reducing […] energy dependencies; and c) Building a more robust economic base.” However, that goal can only be met in the long term.

In the case of Germany, as the energy crisis is deepening its impact on its economy, German Chancellor Olaf Scholz has authorised the country’s three remaining nuclear power plants to continue working through mid-April 2023. The initial plan was to phase out the rest of the nuclear power plants by the end of 2022. The picture below depicts the nuclear power plants of Germany, which are Isar 2, Neckarwestheim 2 and Emsland.

Sites of Germany’s Nuclear Power Stations

Mr Olaf Scholaz from the Social Democrat (SDP) had to overrule his part’s alliance partner the Greens oppositions of the operation of the three nuclear power plants. However, as nuclear energy accounts for six per cent of Germany’s energy sources, the option of nuclear energy can not be done away with. The chancellor also requested that ministries produce a viable law to increase energy efficiency and establish a phase-out of coal by 2030. In order to secure the security of the energy supply, Scholz also stressed on the development of new hydrogen-capable gas plants. Russia’s energy supply failure forced Germany to change the composition of its energy mix.

It can be reiterated that to ensure the energy security of a country, it is crucial to diversify its energy imports for the smooth functioning of the economic activities and domestic needs of a state. Additionally, to mitigate climate related crisis in the long-term, it is also important to attempt to diversify towards greener and more sustainable sources of energy generation.  

The views expressed are those of the author and do not reflect the position of the Centre for Air Power Studies.

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