Ukraine War’s Lesson: Energy Security Begins at Home

His invasion of Ukraine one year ago may not have gone in the direction Russian President Vladimir Putin intended, but it definitely altered the trajectory of the global energy transition, an expert in the geopolitics of European natural gas told Hart Energy.

“It has changed because energy security as a matter of consideration is in the front of everybody’s mind,” said Anna Mikulska, a fellow in energy studies at Rice University’s Baker Institute for Public Policy.

And it probably changed the attitude of countries that had seen the execution of the energy transition as a mission unto itself and not contemplated the need to partner it with energy security.

That realization stemmed from Putin’s weaponization of natural gas against opponents of the Feb. 24, 2022 invasion.

Cutting off the flow of gas to European customers may have come as a shock to countries like Germany and France. As those countries led the European Union’s (EU) decarbonization efforts, they were convinced that Russia would continue to deliver energy resources to western markets, Mikulska testified to the Senate Committee on Energy and Natural Resources on Feb. 16.

The cutoff didn’t surprise Mikulska, though, nor did Europe’s forceful response in replacing Russian gas with expensive LNG, as well as increased mining of coal, to generate electricity. To some extent, the infrastructure was already in place. For example, Germany was able to incorporate floating LNG facilities within months of the invasion.

“These LNG terminals have been planned for a while,” she said. “It’s just that the system was never made to go to the next stage. A lot of infrastructure, in particular pipeline infrastructure, was there and the connection to the floating terminals was much easier than it would have been anywhere else in the world.”

That’s because Europe could afford it.

The advantage of wealth

In the wake of the Ukraine war, the global rift between the haves and have-nots has become more pronounced. Western Europe possessed the wealth to compensate for the reduction of Russian gas. Others, Mikulska said, were literally left out in the cold this winter.

In Pakistan, for example, imported LNG accounted for about 25% of the gas used for power generation, factories and home cooking prior to the war, according to BP. After the war began, however, the European benchmark price of gas soared and those shipments were diverted to western European customers better able to afford them.

Pakistan began rationing fuel, and coal and nuclear plants were shut down on a limited basis. In late January, plants failed to restart and the country endured a nationwide blackout. Now, its policy has changed to move away from LNG and quadruple domestic coal production.

U.S. LNG terminals more than doubled their volumes sold to Europe to 2.7 Tcf in 2022, helping the EU replace 80% of pipelined Russian natural gas. But it wasn’t enough, and more coal needed to be burned to close the gap, a development not lost on the leaders of emerging economies.

“Aiming to reduce their dependence on Russian crude oil and natural gas, countries in Europe had to switch to coal to keep their homes warm and well-lit,” according to an Indian budget document. “The behavior of European nations in 2022, eminently understandable, demonstrates the return of energy security as a prime requirement for countries. Therefore, it stands to reason that it would be no different for developing economies too.”

Surveys of Asian populations before the Russian invasion of Ukraine revealed that economic growth and employment topped the list of concerns, not environmental threats or climate change, Mikulska said.

“The developing world has been saying all along: in order to develop, to reach the structure of development that Europe or the U.S. or Australia are at, we actually need reliable energy sources. And a lot of it,” she said. “Energy security has been one of the major issues for both the government and the population.”

The rift has been there all along, Mikulska said. “I think it wasn’t sinking in until the invasion happened and Europe had to turn back to the idea of energy security.”

Fossil fuels remain dominant

Europe caught a break with a surprisingly mild winter, giving it some breathing room to contemplate its next steps, she said.

For now, the plan is simple: “You don’t want your population to starve. You don’t want your population to be cold, and so Europe came to all-of-the-above.”

RELATED

Russian Fiscal, Export Revenues Plunge in January

Those kinds of steps, even increased mining of lignite coal in Germany, are acceptable to Europeans as long as they are understood as emergency measures.

Politically, it makes sense to say it’s short term because the public in Europe has been conditioned to see the energy transition as necessary, unavoidable and something to be desired, Mikulska said. “So, politically, saying …we don’t know how long, would not be actually something that would be popular.”

Europe has spent a lot of money on many fronts of the energy transition, including new infrastructure for gas, renewables and hydrogen, trying to create new markets or sources of supply. It’s money that most countries in the world don’t have, and it’s only achieved so much, so far.

“Truly, none of the alternative solutions can pick up the entire slack from traditional fuels like gas and coal,” she said.

For countries without the financial resources to invest in new, as yet unproven sources of energy, the solution is simple: invest in what you have.

“If something is developed domestically, it’s the most secure source of energy,” Mikulska said.

It’s why Pakistan, India and Indonesia turned to coal when the price of natural gas skyrocketed. The lesson of the war in Ukraine has underscored what has been true all along: energy security is important.