Five things to know about EU’s big plan to cut Russian fossil fuels

The European Union is going through a once-in-a-lifetime dilemma: minimize its heavy and expensive dependency on Russian power whereas maintaining the lights on for residents and companies throughout the continent.

The sudden reckoning has been prompted by Russia’s invasion of Ukraine, a large-scale navy operation that’s partly bankrolled by the Kremlin’s worthwhile gross sales of fossil fuels, of which the EU is the primary shopper.

Final yr, the bloc spent virtually €100 billion on Russian power, a determine that has been haunting the 27 because the warfare broke out. As stress from Kyiv and different worldwide allies intensifies, the necessity to slash imports from Moscow turns into a geopolitical technique of utmost urgency.

With this in thoughts, the European Fee has unveiled an formidable and far-reaching plan, aptly coined “REPower EU”, to attain full power independence from Russia by 2027.

The plan is “basically political”, mentioned a senior Fee official, and responds to the pledge that EU leaders made on the Versailles summit in March, once they vowed to “scale back our power dependencies.”

However it’s also transformative: for a bloc that has for many years grown accustomed to a budget and dependable provides from Russia, a complete halt in imports will entail monumental challenges to diversify suppliers, redesign infrastructure, mitigate worth hikes, enhance effectivity, increase renewable options and, above all, guarantee households and factories stay powered with out interruption.

“Putin’s warfare is disrupting the worldwide power market,” mentioned Ursula von der Leyen, president of the European Fee, whereas presenting the plan on Wednesday afternoon.

“It exhibits how dependent we’re on imported fossil fuels. And the way susceptible we’re to counting on Russia for importing our fossil fuels.”

All eyes on LNG

As Russian coal has already been sanctioned and oil is within the strategy of being so, the massive power swap hones in on gasoline, probably the most politically delicate gas.

Russia is the EU’s prime gasoline supplier, accounting for 45% of complete gasoline provides – 155 billion cubic metres (bcm) – in 2021.

Brussels is properly conscious that this large quantity of gasoline won’t disappear in a single day or get replaced by inexperienced merchandise, so the highest precedence is to seek out gasoline elsewhere to fill within the hole.

Liquified pure gasoline (LNG) emerges as probably the most available answer to this quandary. LNG is gasoline that has been cooled down and is transported by ships, which then unload the tanks in refined terminals that flip the liquid again into gasoline.

This presents an ideal benefit for coastal states which have terminals in place, like Spain, Italy and the Netherlands, and might enhance their purchases with relative ease. The EU has been breaking information of LNG imports because the begin of 2022, reaching 12.4 bcm in April.

Nonetheless, LNG is pricey and the worldwide market is very aggressive, with Asian consumers providing massive cash for the tanks. It additionally places landlocked international locations at an obstacle as a result of they do not have entry to ports and are compelled to acquire their gasoline provides via pipelines, most of that are Russian-operated.

REPower EU means that as much as two thirds of Russian gasoline – round 100 bcm – may very well be slashed by the tip of this yr. Half of this – 50 bcm –  would get replaced by LNG diversification, whereas 10 bcm would come from non-Russian pipelines, together with these from Norway, Azerbaijan and Algeria.

The EU is now centered on signing offers and partnerships with the main LNG producers. A latest political settlement with the US is about to supply the bloc with an additional 15 bcm of America-made LNG.

Brussels can also be engaged with Qatar, Egypt, Israel and Australia to safe further provides and needs to discover the potential of African international locations like Nigeria, Senegal and Angola.

“The Fee is simply trying to find new fires to stay its palms in,” mentioned Silvia Pastorelli, power campaigner at Greenpeace EU. “These plans will additional line the pockets of power giants like Saudi Aramco and Shell, who’re making file earnings on the again of the warfare, whereas individuals in Europe wrestle to pay the payments.”

27 shopping for as one

So as to break via the fierce competitors for LNG world wide, Brussels would love the 27 member states to purchase as one single shopper and exploit their leverage because the world’s largest single market.

The bloc has already arrange the EU Vitality Platform, a voluntary scheme to pool demand and coordinate imports that met for the primary time in early April.

Brussels goals to take this a step additional and create a “joint buying mechanism”, a collective enterprise to barter gasoline contracts on behalf of member states.

The mechanism can be voluntary and construct upon the teachings realized from the procurement of COVID-19 vaccines, which the Fee spearheaded to acquire hundreds of thousands of doses at reasonably priced costs whereas avoiding a race-to-the-bottom.

The thought of joint purchases of gasoline raised to prominence final yr, when an influence crunch started sending electrical energy payments hovering. France, Spain, Italy, Greece and Romania had beforehand voiced their assist for centralised procurement, arguing it could convey down costs and strengthen power safety.

“It is crucial for all member states, beginning with the massive international locations to be on board,” Simone Tagliapietra, a senior fellow at Bruegel, instructed Euronews.

“This isn’t going to be good only for the small international locations, specifically within the East, that may have downside to obtain gasoline in case of a Russian interruption flows. It can safeguard general power safety in Europe.”

Chopping (inexperienced) purple tape

As gasoline is a restricted, in-demand commodity, the EU wants to seek out different assets that may compensate for the lack of Russian fuels.

REPower EU is taken into account an additional layer of the European Inexperienced Deal and has a marked give attention to renewable power. The Fee proposes to hurry up the deployment of wind and photo voltaic techniques with the goal of changing over 20 bcm of Russian gasoline earlier than the tip of the yr.

However this purpose faces the good wall of forms: on common, wind farms take 9 years to be accomplished whereas photo voltaic panels require from 4 to 5 years to be put in. The method is extremely complicated and entails quite a few authorisations associated to building, power, setting and structure requirements.

In a brand new suggestion, Brussels asks member states to considerably velocity up the method and set up binding most deadlines for all related phases. Renewable power turns into an “overriding public curiosity” that justifies quicker allowing.

“Dashing up allowing is a good suggestion,” mentioned Alex Mason, head of power coverage on the WWF EU workplace. “However the way in which to do that is to repair inefficient bureaucratic procedures, not weaken environmental laws. Indiscriminate exemptions from nature legal guidelines for renewable power initiatives may hurt biodiversity and fire up public opposition –  inflicting conflicts and additional delays.”

On the identical time, the Fee proposes to replace the EU’s renewable goal for 2030, from 40% to 45% of all complete power produced throughout the bloc, and to make photo voltaic panels necessary in all new public and residential buildings by 2027.

The query of ‘behavioural adjustments’

Independence from Russia power would require greater than LNG and photo voltaic panels: the good goal can even want “behavioural adjustments” in the way in which Europeans devour electrical energy.

Among the many options: use extra public transport, scale back the velocity on the freeway, flip down the heating and air conditioning, make money working from home and select households home equipment which can be extra environment friendly.

“Saving power is the most cost effective, most secure and cleanest option to scale back our reliance on fossil gas imports from Russia,” the Fee’s doc reads.

None of those options are legally binding and echo earlier calls made by the Worldwide Vitality Company (IEA).

Brussels estimates the adoption of those measures will convey down electrical energy demand and erase the necessity for 13 bcm of Russian gasoline within the quick time period.

However because the proposals lacked legislative weight, it is unclear how a lot European households and corporations, who’re coping with sky-high payments and hovering inflation, can be keen to contribute on their very own volition.

The Fee intends to work with the IEA, nationwide governments and native authorities to develop data campaigns in a bid to advertise energy-efficient attitudes.

A hefty price ticket

The magnitude of the transformation envisioned by REPower EU comes, as anticipated, with a hefty and attention-grabbing price ticket: turning into unbiased from Russian power will price an additional €210 billion between 2022 and 2027, the Fee estimates.

Over €110 billion will go to the deployment of renewables and hydrogen techniques.

In an train of monetary repurposing, Brussels has proposed the majority of the cash ought to come from the unused loans of the COVID-19 restoration fund.

When EU leaders agreed to step up the novel instrument in 2020, they break up the funds into €312.5 billion for grants and €360 billion for low-interest loans. Since loans had be progressively repaid, nearly all of member states forsook them and requested solely their allotted share of grants.

This has left €225 billion in untouched loans that may now be tapped into to finance the redesign of power grids. Revenues obtained from the Emissions Buying and selling System may convey an additional €20 billion in grants.

“The mixture of recent grant cash with unused loans can grow to be very enticing,” mentioned a senior Fee official, noting the financial challenges posed by the warfare inevitably require extra financing.

Notably, the Fee’s price estimation foresees €2 billion to revamp oil infrastructure.

As a part of a brand new package deal of sanctions, member states are presently discussing a ban on Russian oil, however the proposal stays caught as Hungary, a rustic related to the Russian-operated Druzhba pipeline, calls for an extended phase-out and copious financial assist.