May 18, 2022
As you are reading this article, in various countries within the European Union (EU), families are waking up for the day and getting ready. The alarm clock starts to beep, the lights come on, warm water pours out of the shower, and microwaves and stoves are heating up breakfast. No matter where you live in the world, these daily tasks of modern day living all share the same process of converting energy into work to provide heat or electricity. Regardless of where you live in the world, energy is a necessity for modern day living and to be able to use that energy you need a fuel source. Since climate change has become a reality, with the signing of the Paris Climate Agreement, many countries including the EU have set forth goals for themselves to lower emission ratings in order to combat climate change.1 As renewables are still not capable of satisfying the energy demands of a majority of countries, EU-member nations such as Germany, Poland, Finland, and Romania, still remain dependent on fossil fuels. Although still a fossil fuel, many countries are switching from coal to natural gas because gas burns cleaner and has lower carbon dioxide emissions, while still satisfying energy needs. 2
Since 1970, the EU has been consuming more natural gas than it has been producing. 3 About 26% of this natural gas has been used for power generation, 23% is used for industrial purposes, and the rest is for heating for commercial residences and businesses. While natural gas resources are available in many locations within the EU, the main producer, the Netherlands, only accounts for 8% of EU domestic production.4 Over the course of a year this amounts to about 400 billion cubic feet (bcf) of natural gas consumed in the EU member nations. Natural gas consumption in the EU is predicted to remain constant for future years, but at the same time natural gas production within the EU is predicted to decrease, resulting in more reliance on imports from gas neighboring countries. 5 Some countries, such as Russia, have an abundance of extractable natural gas, and at present are an important part of the EU energy future. As far as the EU is concerned, Germany, the main hub of distribution, does not have abundant supplies to produce when compared to countries like Russia. This limited amount of domestic natural gas resources causes the numerous countries that make up the EU to satisfy their energy demands on imports of fuel sources from other countries like Russia.In 2015 the EU established the energy union plan which laid out five dimensions in which the first two dimension describe the need for security, solidarity, trust, and the free flow of energy to diversify the sources of production and share this energy throughout the countries of the EU. 7 The plan was a means to balance exports within the EU, but many of the countries in the EU that produce energy are not capable of supplying enough energy to support the energy demands of their own county, let alone the entire EU. The limited domestic resources used to generate energy, leads to a dependency on imports from neighboring, non-member countries such as Russia, the source of much of EU natural gas imports. 8 Dependency becomes a problem when conflicts arise, such as the 2022 Russian invasion of Ukraine, and the previous Russian invasion of Crimea in 2014. Relying on exports from a non-member state can put the EU in a difficult place, because countries like Russia can exert leverage over countries like those in the EU by threatening to turn off the supply of vital energy resources, jeopardizing the economy. As of January 1, 2021, Russia was the world leader in natural gas reserves, with a total revenue of 1,688 trillion cubic feet 10. Reserves of this size could potentially satisfy EU natural gas demands for more than 100 years.11 Russia is the number one provider of natural gas for the EU, supplying about 40% of its natural gas demands. 12. The current Yamal pipeline transports about 1,160 bcf per year of natural gas, with the Nord Stream 1 pipeline an additional 1,930 bcf per year.13 Set adjacent to the Nord Stream 1 pipeline, the proposed Nord Stream 2 would double the capacity of the current flow of natural gas transported to the EU, but Nord Stream 2 has become a hot topic in the news recently with the Russian invasion of Ukraine. Before the Russian invasion of Ukraine, EU-member nations such as Germany and Austria were in favor of the pipeline being completed, saying that it would ensure the EU’s energy security. Those not in favor, including other members of the EU and the United States, indicated that the pipeline could increase dependency on natural gas from Russia, giving it even more geopolitical power.15 As the Russian invasion continues, increasingly harsh sanctions are being imposed by the world community, and Germany recently stated that they will halt the licensing process for the Nord Stream 2 pipeline. This delay in permitting will effectively lower the amount of imported natural gas to the EU. 16
Although natural gas is not flowing through Nord Stream 2 as of writing this article in April 2022, natural gas from Russia are still flowing through existing pipelines at the same rate as before the invasion of Ukraine, and the countries comprising the EU still rely heavily on Russian imports. As the conflict continues and sanctions become more likely, a potential energy crisis looms. Amongst the EU-member nations there is worry of the Ukrainian pipeline taps being shut off from damage, seizure of infrastructure, or if Russia risks shutting off a large portion of its economy in response to sanctions, that could reduce available energy supplies. With already high energy prices as the world tentatively emerges from the COVID-19 pandemic, the conflict between Russia and Ukraine could not have come at a worse time, as the EU faces a severe impact during a time when their main focus is to become emission free by 2030. 17
As the invasion continues and more and more sanctions are imposed, Russia may begin to look to other countries, such as China, to export natural gas. 18However, the EU, still hopes to adhere to the energy union plant established in 2015 to provide affordable, secure, clean energy to its citizens and services. As the EU plans to satisfy the goals established with in the energy union plan, the countries of the EU are also looking to lower the dependence of its member nations on natural gas and coal. The dependency on natural gas is still large, however, and to curb the dependency on Russian natural gas, the EU is looking abroad to other countries to supplement its energy needs through the importation of liquified natural gas (LNG). President Joe Biden has already pledged to send increased volumes of LNG from the United States to the EU, Germany has signed an agreement with Qatar to receive supplies of LNG, and there have been talks between Japan and South Korea to transport natural gas supplies to the EU. 19
LNG offers advantages over gas pipelines, especially when conflict brings uncertainty. For example, LNG can be transported worldwide through means of ship, train, and truck containers, a more flexible transport option than a fixed pipeline network. The one major disadvantage to LNG is that the storage capacity of containers to ship this fuel source worldwide is limited, and would require a number of large LNG ships to transport the amount of LNG needed to supply EU energy needs.20 This highlights that countries, such as those comprised of the EU, that have limited amounts of fossil fuel resources are dependent on countries that have abundant supplies. If the EU plans on fulfilling the pledge of zero carbon emissions by 2030, perhaps it is time to develop energy sources from renewable resources.
Thankfully Germany, one of the EU’s biggest importers or natural gas from Russia has dropped its dependency on Russian natural gas from 55% to 35%21. Although this puts Germany and the rest of the EU in a short-term bind to increase natural gas storage levels in preparation for the upcoming winter season, it has proved beneficial in highlighting the importance of renewable energy sources as a long-term energy solution. Germany has released a plan known as the Easter Package, designed to advance the development of renewable energy structures such as solar, on-shore and off-shore wind power. The package means to increase the renewable energy share of total energy production in Germany to 80% by 2030, with 100% renewables by 2035. This would accumulate to structures that would produce 22 gigawatts (GW) of solar, 10 GW for on-shore wind power, and 2.5 GW of off-shore wind power on a yearly basis. As of 2021, Germany has managed to produce renewable structures totaling 5.6 GW of solar power as well as 1.9 GW of on-shore wind power, less than halfway to the goals of the Easter Package.22
Although the proposed share of renewable energy is falling behind the targeted timeline, the fact that EU member countries such as Germany are working to increase renewables, demonstrates hope for a more diverse and resilient energy portfolio. With this resilience, the EU economies will likely be less dependent on fossil fuels, and perhaps less susceptible to the geo-political pressures that come with them.
Stefan, your article was really interesting to me. I never really thought about the impact of the Russian invasion of Ukraine on natural gas distribution. I learned EU is trying to refrain from being dependent on Russia for natural gases because of political instability. It’s also really unfortunate that Covid-19 and political conflicts are disrupting the EU’s goal of zero carbon emissions by 2030.