A Blog by Jonathan Low

 

Oct 28, 2022

How Russia's Ukraine Invasion Has Accelerated Energy Transition to Renewables

Another unintended consequence of Russia's Ukraine invasion has been to hasten the global transition to renewable energy as more corporations and countries realize that the political and economic cost of being held hostage by Russia, the Saudis et al is not a price they want or can afford to pay long term. JL 

Josh Marshall reports in Talking Points Memo:

The Ukraine war looks likely to become an inflection point accelerating the global energy transition. The 2022 crisis is driving three main effects: “an accelerated energy transition, the end of Russia as the world’s pre-eminent fossil fuel power costing Moscow some $1 trillion in revenues to 2030, and an end to what has been a golden age for gas.” In short, A sharp rise in fossil fuel prices has made an ongoing transition more economic and actual supply cut offs have forced emergency moves in the direction of non-fossil fuels. Russia’s invasion has shattered the oil and gas juggernaut it spent decades building.

The Russo-Ukraine war has spurred a vast and sustained increase in energy prices and threatens possibly severe shortages of heating fuel this winter in Europe. The United States, while committed as a matter of policy to a clean energy transition, is nevertheless pressing various global producers to ramp up production of oil and gas. But the newly released annual World Energy Outlook report from the International Energy Agency suggests these present crises mask a more profound and lasting impact.

In short, the Ukraine war looks likely to become an inflection point accelerating the global energy transition. As the energy sector publication Energy Intelligence summarizes the report, the 2022 crisis is driving three main effects: “an accelerated energy transition, the end of Russia as the world’s pre-eminent fossil fuel power costing Moscow some $1 trillion in revenues to 2030, and an end to what has been a golden age for gas.”

You can read the executive summary of the report here.

The basic outlines of this prediction about an accelerated transition are simple enough: A sharp rise in fossil fuel prices has made an ongoing transition more economic and actual supply cut offs have forced emergency moves in the direction of non-fossil fuels.

What interested me most about the report however is the impact of the Ukraine War on Russia itself. Russia has spent decades building up both the economic engine of its fossil fuel industry as well as its geopolitical power. The report includes a range of scenarios for how the 2022 energy crisis impact plays out over the coming decades. But in each scenario Russia’s role as an energy producer goes into permanent decline. As the report’s executive summary puts it, “Russian fossil fuel exports never return — in any of our scenarios — to the levels seen in 2021, and its share of internationally traded oil and gas falls by half by 2030…”

Most of the details behind decline are technical. Europe significantly retools away from Russian natural gas and the export path of those supplies reorients toward the Far East. But for various reasons the Asian economic and energy landscape simply does not have the capacity to absorb that redirected supply.

The impact of the Russo-Ukraine war on global energy transition would clearly be the most profound, lasting and apparently positive effect of the war. But the report provides another example of the sheer magnitude of the self-inflicted catastrophe the war has been for Russia. We’ve known about the geopolitical carnage for a while. Russia failed to subdue Ukraine but the failed invasion created the united and increasingly militarized NATO post-Soviet Russia has long feared. The economic impact seems no less profound. Russia can and is forcing a cold crisis winter on Europe. But winters end.

For decades the U.S. warned Europeans, especially the Germans, that hardwiring themselves to Russian gas was a geo-strategic risk. Russia proved that to the be the case in 2022. But the stakes Russia created with the Ukraine invasion were so great that Europe has chosen to decouple itself from Russia at great short-term cost. Russia’s invasion has shattered the oil and gas juggernaut it spent decades building.

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