The sanctions are piling up. Seven Russian banks, including its second largest, VTB, will be excluded from Swift, the backbone of international financial transactions. Companies including Apple, Ford, NIKE and Siemens have announced their withdrawal from the Russian market. Oil majors including Shell, BP, ExxonMobil and Equinor have said they will exit the country.
What would hit Russia the hardest, however, is to end imports of its fossil fuels, with the oil and gas sector providing around 40% of federal government income. Russia supplies 40% of Europe’s gas and 25% of its crude oil; a painful irony of the current war is that Europe is effectively paying for the invasion of Ukraine as a result of its fossil fuel imports.
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The immediacy of the Ukraine crisis means that finding alternative sources of gas – whether from nearby partners like Norway or Algeria, or through LNG imports – will likely form a part of any strategy to rapidly cut ties with Russia’s economy. Accelerating Europe’s energy transition – which would mean reducing gas’s share in the electricity mix, improving energy efficiency, and replacing gas gas boilers with heat pumps – is another effective solution to hurt Russia, with the added benefit of being good for the planet. However, just how quickly can such an accelerated transition actually take place?
De-gasifying power
Gas fuels around one-fifth of Europe’s electricity generation. While some countries have seen generation from gas increase as they move away from more heavily polluting coal, recent years have seen others dramatically decrease gas generation. As the below chart illustrates, the Netherlands (-17TWh/-24%) and Spain (-15TWh/-18%) have respectively seen massive falls in gas generation in the space of just two years, with renewables in its place.
In all, think tank Ember calculates that more than half (52%) of new renewable generation since 2019 has replaced gas (and a third nuclear and a sixth coal). This compares with 2011–19, when more than 80% of renewables replaced coal. Ember’s data also shows the Netherlands, Spain and Greece have all seen their share of solar and wind generation increase by around 10% in the space of just three years.
“These countries demonstrate that if you put the right policy framework and incentives in place, very rapid growth is possible, and fossil fuels fall fast,” Charles Moore, Ember’s Europe programme lead, told Energy Monitor.
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By GlobalDataPolicies to further accelerate the roll-out of solar and wind power, and therefore reduce Europe’s reliance on Russian gas, will not have any impact in the immediate term. "But renewables growth can be much higher than planned from 2024–25 onwards, provided the policy framework is put in place right now,” says Moore. He suggests that the European Commission address administrative barriers like permitting to make this a reality, as “process, not costs, is now the main barrier to development”.
In a briefing whose release coincided with Russia’s invasion of Ukraine, the think tank E3G also advocates a “fast expansion of renewable energy and interconnections for the power sector”, which aims at “reducing structural gas dependence for system balancing”. E3G adds that by 2026 the EU could be installing 90GW of wind (up from 10GW in 2022, according to GlobalData, Energy Monitor's parent company) and 50GW of solar (up from 25GW). The think tank says this would require “an additional push on permitting”, and an accelerated “deployment of a shared grid in the North Sea”.
Data from Ember shows that countries with both high solar potential (like Spain and Cyprus) and low solar potential (like the Netherlands and Germany) are now generating roughly one-tenth of their power from solar. This suggests that effective government policy, rather than local conditions, has been a crucial factor in determining which countries have seen the greatest growth in renewables.
Electrifying heating
Gas provides around 35% of Europe’s heating. Many experts now agree that the way we will move away from gas in this area is through the roll-out of electric heat pumps. There were 14.8 million heat pumps in Europe at the end of 2020, shows data from the European Heat Pump Association. Some of the growth figures for 2021 that have already emerged – for example, 53% for France and 54% for Switzerland – suggest that with the right policies in place, things can progress rapidly.
Norway has the greatest share of heat pumps in Europe, with around one for every four citizens. The technology began appearing in Norway after the 1973 oil crisis, when a government-funded programme to encourage their installation was introduced. However, it was in the 21st century that growth really took off, the result of generous government subsidies, high fossil fuel taxes, cheap electricity and a 2020 ban on oil boilers.
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A policy to rapidly escalate heat pump installations in other countries could have a big impact. Jan Rosenow, from think tank the Regulatory Assistance Project, points out that the UK currently installs around 1.7 million gas boilers per year, which is significantly greater than the estimated 67,000 heat pumps installed in 2021. Rosenow estimates that if the UK were to install 1.8 million heat pumps per year for the next two years, the country could eliminate all Russian gas imports, which make up approximately 5% of UK gas.
A pragmatic path forward
There is, though, a risk that the horror of what is happening in Ukraine could lead policymakers to focus purely on altering gas supplies. “I think the focus is likely to shift away from emissions reductions and towards energy security and energy cost going forwards,” suggests Biraj Borkhataria, from the investment bank RBC Capital Markets.
Allen Good, an energy analyst at financial services company Morningstar, also believes the priority will be to find new sources of gas, with LNG from the US likely to form a large part of the solution. However, he says: “Russia is so deeply entrenched in the European market, and support for new domestic gas production is low in European countries, that it isn’t possible to simply flick a switch to change suppliers.”
Think tank Carbon Tracker recently suggested that European policymakers use the Ukraine crisis as a catalyst to further accelerate the roll-out of clean energy systems. Accelerating the energy transition is also logical from an economic point of view; the EU pays around €360bn ($393.13bn) a year to import fossil fuels, a sum equal to the clean energy investments needed for the bloc to meet its 2030 'Fit for 55' climate targets. Diversifying to renewables more rapidly reduces the financial risk of stranded assets and will provide more cost-competitive electricity than gas in most markets.
The International Energy Agency released a ten-point plan on 3 March the agency suggests could reduce reliance on Russian gas by a third in just one year. It includes more practical security of supply recommendations, such as replacing Russian supplies with gas from alternative sources and introducing minimum gas storage obligations. It also calls for moves to “accelerate the deployment of new wind and solar projects” and for greater energy efficiency improvements, pointing out that at present just 1% of the EU’s building stock is renovated each year.
