Summary – Following today’s publication of REPowerEU, the European Commission’s roadmap for ending our dependence on Russian gas, here is a short commentary that will also be published in the newspaper Alternatives Economiques. It is an opportunity to recall two things. First, that this Russian gas is currently a very large source of income for Putin; and second, that the efforts we will have to make (rationing and accelerated investment) should be directed as much as possible towards the energy transition, to fight climate change and in a spirit of European cohesion. Because there are fundamentally two risks: a step backwards on climate, and intra-European tensions. The details provided today on REPowerEU explore the medium to long term (2027-2030) rather well and are interesting, but they remain vague about what we must do to achieve the reduction promised for this year. Is that a strategy to avoid showing all our cards to Putin? Or should it be read as a delegation to the member states? A wish not to interfere with the electricity market? In any case, it is not entirely reassuring.
Introduction
The Ukrainian crisis has allowed us to take the measure of the scale of our energy problem, in particular through the sums paid directly to Russia to satisfy our dependence. The CREA (Centre for Research on Energy and Clean Air) provides an estimate since 24 February, the day the war started, and we are approaching €50 billion — roughly the annual budget of the Russian army. With that money we buy mostly oil and gas, but also some coal.
At European Union level, of the 4000 TWh of gas we consume each year, only 10% is produced within our borders, and 1550 TWh, that is almost 40%, comes from Russia — and according to the Commission we came down to 20% over the first months of 2022. Under the “REPowerEU” plan, refined today, 18 May, at a press conference, we have committed to cutting these imports by more than 1000 TWh by the end of the year, and to bringing them to zero before 2027. For this year, additional sources are already secured: 100 TWh by pipeline from Algeria to the south and Azerbaijan to the east, an extra 500 TWh of liquefied natural gas (LNG) delivered through LNG terminals, and a few tens of TWh from the development of biogas. The Commission has set up a joint purchasing platform for gas, presented on 8 April, to avoid competition between member states. What remains to be determined is how to cut our gas consumption today by around 350-400 TWh. The 18 May publication fleshed out the Commission’s vision for 2027 in connection with the 2030 “fit for 55” package, but it remained fairly evasive about the concrete instruments to be deployed to meet our targets for the end of 2022.
Substitution and reduction
This consumption is spread across three broad sectors: buildings (heating and cooking in the residential and service sectors), industry (for heat or chemistry, as with fertilisers), and electricity generation. Let us examine what can be done overnight, either by substituting energy carriers or by outright reduction.
As far as substitution is concerned, it is above all in electricity generation that it is rapidly feasible, by increasing the utilisation rate of biomass plants, coal plants or nuclear plants, but also by accelerating the deployment of new wind and solar capacity. Note that in France we are going to have a serious problem with electricity, even more than with gas, with 12 of the 56 nuclear reactors possibly still shut down because of corrosion problems. On renewables deployment at European level the Commission’s figures for this year are not clear: 500 TWh less gas is mentioned here among short-term objectives, but that is obviously not for this year, since we add around 30 TWh of renewable electricity each year in Europe.
On the rationing side, if industry generally comes to mind, it is because nothing technically stands in the way of implementing it there. The economic consequences can be significant and felt across the European Union, but they remain small compared with what we experienced with COVID. Moreover, organising rationing and the supply levels considered is a complex task that is better prepared today than in a hurry on the day Putin decides to turn off the taps. Quantifying the very short-term savings is for now a missing piece of the puzzle, and one may regret that Europe did not address the question more explicitly.
We should have considered some time ago a form of temporary rationing in the service and residential building sectors, by encouraging lower heating — whether gas, oil or electric. The International Energy Agency (IEA) estimates that one degree less on heating set points would save us 100 TWh of gas. To implement that, there is no other means than price incentives. Yet the challenge is not to leave behind households that already experience severe energy poverty and already heat their homes 2 to 3°C less than others.
In all these short-term measures, the Commission probably does not want to be too prescriptive about the operation of the power system and its market, or about any form of rationing. And yet it is precisely in this crisis that we would need a strong political Europe, and one must hope that the absence of a published detailed plan is more a communication strategy than a complete absence of thinking — and here it is no doubt up to the member states to take their responsibilities.
Risks and opportunities for the climate
This crisis puts us up against the wall regarding our gas consumption, but also our oil consumption. There is a risk that it slows the energy transition needed to avoid climate catastrophe — if for instance we choose to generate electricity with more coal, since that is an easy and quick lever that could cut gas consumption by 250 TWh, but also if we invest too heavily in LNG, because the tensions we will create on that global market could well push some countries on the other side of the world to reinvest in coal.
Yet the Ukrainian crisis is also an opportunity to accelerate the energy transition — with biogas, provided we maintain non-competition with food production; with wind and solar, which each year visibly reduce our gas consumption; but also with the renovation of energy sieves and the deployment of heat pumps. REPowerEU aims to speed up permitting procedures for wind projects and to make solar PV mandatory on certain roofs. Europe plans to make €300 billion available, 95% of it dedicated to accelerating investment in the energy transition by 2027.
Public money still too badly targeted in France
In France, renovation still receives resources that are too limited relative to the investment required: the State has provided half a billion euros through “MaPrimeRénov’” since January 2022, and the same amount to increase the energy voucher by €100 for the two poorest deciles, whereas €26 billion have been put on the table in the tariff shield to prevent gas and oil price increases since the autumn of 2021. This policy is demagogic. Applied uniformly, it runs counter to what we need: no incentive to consume less, very little investment in infrastructure, and very little support for those genuinely in difficulty. Beyond the very small amounts, the French Court of Auditors has clearly shown that the way support for the energy-poor is coupled with renovation investment is far from optimal. Overall coherence with the objective of banning class G dwellings in 2025 is, for the time being, rather weak.
Finally, this crisis calls for a united European response. Each country has its own particularities and varying levels of dependence on gas and on Russia. We must avoid stoking internal tensions by criticising each other’s choices — nobody is exemplary — or an individualistic management of the remaining reserves. Ukraine has understood this well, refraining from cutting the European gas supply that transits through its territory. So has Putin. But acting collectively does not prevent taking the lead on certain subjects. Implementing inclusive sufficiency has something to teach us about our capacity to consume less in a constrained world. We must electrify end uses with heat pumps and electric vehicles, and green hydrogen production for industry. At the same time, it is essential to develop our low-carbon renewable generation, and also, in the longer term in France, new nuclear plants. We must stop pouring all our energy into the opposition between nuclear and renewables, or between sufficiency and technology, and turn instead towards acceleration on every front. Because these factional wars, through which we prevent ourselves from making progress, mainly serve the interests of gas and oil exporting countries in general and of Putin in particular — not those of Ukrainians, nor our own.