Nord Stream 2 should be juxtaposed next to the Berlin Wall – two dying races of oppression and a sign that a new day is coming. If the dilapidated wall represents the fall of communism, the demise of Nord Stream 2 embodies the death of autocracy and the rise of renewable energy.
Despite the European Union’s dependence on Russian oil and gas, it said it would accelerate its transition to green and separate from Russia’s economy. The continent aims to increase its share of renewable energy to 32% by 2030 while ending its dependence on Russian fossil fuels. Indeed, its underlying premise is that Russia’s kingpin, Vladimir Putin, is an international threat not only to peace-loving countries, but also to environmental security.
“Let’s dive into renewables at lightning speed,” said Frans Timmermans, who leads the European Green Deal. “Renewables are a cheap, clean and potentially inexhaustible source of energy, and instead of funding the fossil fuel industry elsewhere, they are creating jobs here.”
Europe’s Green New Deal aims to halve the continent’s greenhouse gases by 2030 and be carbon neutral by 2050 – a deal struck in 2019. Pressing the gas will create economic turbulence, forcing citizens and businesses to pay more for energy in the short term. Does Europe have the taste?
Nord Stream 2 is the $11 billion natural gas project designed to bypass Ukraine. It stretches for 745 miles before filtering into the Baltic coast of Germany. Now he is dead – the first victim of Russia’s unprovoked war against Ukraine. Germany is now forgoing Russian natural gas and committing to go green by 2035. Meanwhile, the European continent is stepping up investment in energy efficiency and demand side management.
Russia is Europe’s biggest supplier of natural gas, supplying a third of its gas in 2021. But the war will cause demand to fall by 6%, according to the International Energy Agency. At the same time, the world added a record 295,000 megawatts of new renewable energy capacity in 2021, overcoming supply chain challenges, construction delays and high commodity prices. That figure will rise to 320,000 megawatts this year. For Europe, it has increased its renewable energy by 30% in 2021 to 36,000 megawatts – figures that will only increase.
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Where is the United States going?
What are the implications for the United States? He banned Russian oil and gas. Here, locally produced natural gas replaces coal and results in substantial improvements in CO2 levels in the electricity sector.
President Biden wants the nation to be carbon neutral by 2050 – a move that would require him to abandon the use of fossil fuels and use more renewable energy. He is committed to helping communities that are being left behind. The United States must electrify its economy – from transportation to manufacturing. That means using a lot more renewables if he wants to decarbonize.
To that end, the president signed an executive order prohibiting oil and gas exploration on federal lands. But only about 9% of shale oil and gas development occurs on private property. And Biden’s goal is to shut down new wells, not prevent existing wells from operating. Still, the oil and gas industry says it’s time to overhaul that policy with record gasoline prices.
In this context, the US Department of the Interior has just said that it will not pursue planned sales of oil and gas concessions in Alaska and the Gulf of Mexico. While Republican lawmakers have criticized the White House, oil companies won’t take chances. In addition, the legal landscape is constantly changing. Oil and gas producers have 9,000 unused drilling permits.
“Industry is free to use these permits as they see fit. They just haven’t acted on them,” Interior Secretary Deb Haaland told a House committee.
Will the United States continue to turn to cleaner energy, or will it double its consumption of fossil fuels to meet increased demand from Europe and abroad? This country will increasingly produce natural gas for export. However, by 2030 and beyond, global and US markets will demand more green energy.
Big Oil can read the signs
The US Energy Information Administration says US exports of liquefied natural gas will reach 12.2 billion cubic feet per day, overtaking Australia and Qatar to become the world leader. But the same agency also predicts that the share of renewable energy used for electricity generation will increase from 21% today to 42% in 2050. Renewables will eclipse natural gas in this country by 2030.
“When there is less certainty about other energy sources, it will help renewables because they are a cheap source of electricity,” says Joe Keefe, managing director of Pax World Funds, in a Morningstar report. “They have become very competitive in terms of price and are good long-term investments. Germany and other European countries have even more incentive to do something about renewables if access to Russian gas is compromised.
Russia will lose market share, but fossil fuels will not evaporate. They represent 80% of global energy consumption. Nevertheless, the Russian invasion of Ukraine is a signal for Big Oil that it needs to diversify – go further and explore wind and solar and develop battery storage and carbon capture.
Meanwhile, Exxon Mobil Corp. invested $10 billion in emission reduction technologies. This includes carbon capture, battery technology and the promotion of green hydrogen. And BP says it will increase its annual investments in clean energy from $500 million today to $5 billion in 10 years. Indeed, a fifth of 1,000 oil and gas executives surveyed by DNV GL say their companies are already investing in hydrogen.
“The invasion helps renewables more than it hurts,” says Shawn Kravetz, president of Esplanade Capital, in the Morningstar report.
Russia underestimated the strength of the Ukrainian army and the will of its people. And now he’s learning a similar lesson about the West and its desire to go green and become carbon neutral.