- The EU wants to reduce its dependence on Russian oil and gas by two-thirds this year and completely eliminate it in five years with renewable energy sources and energy conservation solutions.
- Renewable energy prices around the world have risen sharply over the past year after nearly two decades of decline.
Unannounced upside down
Daniel Yergin – energy historian and vice president of S&P Global – believes that the sudden change from Russia has turned the global energy market upside down because the country has spent decades supplying oil and gas for the world economy. So demand has exploded for the United States, the second-biggest exporter of natural gas globally.
Algeria is a country with a medium share in global oil and gas exports. But the energy crisis in Europe has provided an opportunity for the North African country to emerge. Specifically, a few weeks ago, Italian Prime Minister Mario Draghi visited the capital Algiers to promote a natural gas import agreement with Algeria. Through a pipeline running below the Mediterranean, Italy plans to increase its gas imports from the country by 40%.
In addition to Algeria, Angola, Nigeria, Congo is also emerging as a bright spot in terms of potential energy supply for Europe. Meanwhile, a few other countries are still looking to reliable liquefied natural gas (LNG) suppliers such as the US and Qatar despite higher prices after gradually reducing imports from Russia.
Energy prices are increasing day by day
Prices of natural gas, oil, and coal have risen sharply since last year. “This is actually a bigger energy crisis than the 1970s. That period was simpler, because there was just a shortage of oil,” said Daniel Yergin, energy historian and vice president of S&P Global.
Germany, Europe’s economic locomotive, which depended on more than 50% of its gas supplies from Russia before the war broke out, has reduced this value to 35%. To maintain reserves, the country even plans to allocate energy mainly to important areas.
The EU wants to reduce its dependence on Russian oil and gas by two-thirds this year and completely eliminate it in five years with renewable energy sources and energy conservation solutions. Simone Tagliapietra, energy expert at the Bruegel think tank (Belgium), said the war between Russia and Ukraine is likely to accelerate changes in the EU’s long-term strategy as the bloc adapts to more expensive energy but also more inclusive among member states.
Besides, instead of buying energy from Russia at low cost, Europe must first turn to other more expensive sources like the US. To get a vessel carrying LNG from the Gulf of Mexico to Europe, companies have to spend an additional $1.5/1,000 ft3, equivalent to 30-50% of the initial gas purchase cost.
Projects using alternative energy still face many problems
The Greece – Bulgaria pipeline will complement the existing European network, giving Bulgaria and its neighbors new grid connections, access to the expanding global gas market. The project will also connect with the newly built Trans Adriatic pipeline, transporting gas from Azerbaijan and LNG supplying countries via ships such as Qatar, Algeria and the US. In fact, the project has faced many difficulties due to supply chain problems caused by the epidemic. However, construction of the pipeline was completed in early April, while testing at two measurement stations and software installation is in the final stages.
Cliff Kupchan, chairman of political risk consultancy Eurasia Group, said Europe’s transition to renewable energy would be faster. However, this is still a long-term issue and needs a lot of consideration. Renewable energy prices around the world have risen sharply over the past year after nearly two decades of decline. “There are very few new renewable energy contracts that can be signed and ready to start before 2024,” said Flemming Sorenson, Europe vice president of LevelTen Energy, which negotiates power purchase agreements.