The EU’s plan to end dependency on Russian energy supplies

The Russian invasion of Ukraine has led to a severe disruption in the world energy markets and highlighted the EU’s exposure to and dependency on Russian energy supplies. Economic dislocation within the EU ensued as higher energy prices and severe energy security concerns took effect.

In response, the European Commission drew up the REPowerEU plan which has, as its core purpose, an end to the EU’s dependency on Russian energy supplies. It was agreed that the EU would phase out this dependency as soon as possible. In a European Commission Communication dated May 18, 2022, the EU Commission set out an additional set of actions which supplemented the Fit for 55 Package (designed to reduce EU Greenhouse Gas Emissions by 55% by 2030).

The plan consists of a set of interlocking actions focused on saving energy, diversifying energy supplies, accelerating the move to renewables, and undertaking smart investments and reforms.

Acceleration of Europe’s Clean Energy Transition

The acceleration of Europe’s clean energy transition is at the heart of the plan. The plan envisages

“a massive speed-up and scale-up in renewable energy in power generation, industry, buildings and transport.”

This gets translated into the following targets and actions:

• An increase in the renewable energy generation target in the Renewable Energy Directive from 40% to 45% bringing total renewable energy generation capacities from 1067 GW (Fit for 55 Plan) to 1236 GW by 2030.

• Increase in the target for the roll out of solar photovoltaics technologies- to 320 GW by 2025 (a doubling of existing capacity) and increasing to almost 600 GWs by 2030. These targets are supported by an EU Solar Plan.

• Additional actions include - further development of wind energy generation capacity, increased use of heat pumps, accelerating the development of renewable hydrogen production (target of 10mn tonnes produced domestically and 10mn tonnes imported by 2030) along with development of hydrogen infrastructure, scaling up of biomethane production, boosting bio-energy production, addressing skill shortages, and speeding up permitting and innovation.

Further Actions under the Plan

The plan has a series of further actions which include:

• Clean Industry – Replacing oil, coal and gas in industrial processes is a key action, for example: the EU Commission estimates that EU Industry could save up to 36 bcm of natural gas by 2030 through electrification, energy efficiency and uptake of renewables.

• Energy savings – This is regarded as the cheapest, safest, and cleanest way to reduce reliance on fossil fuel imports and actions are underway to incentivise energy savings, for example: an increase to 13% in the binding energy savings target in the Energy Efficiency Directive.

• Diversifying energy imports – Building long term relationships with international partners to secure energy supplies, for example: the setting up of the EU Energy Platform for the voluntary common purchase of gas, LNG, and Hydrogen.

• Smart Investment – Additional investments of 200 billion euro are needed up to 2027 to phase out Russian fossil fuel imports, for example: Investing 10bn euro in gas infrastructure to enable the importation of sufficient LNG and pipeline gas from other suppliers and 29 billion euro of additional investments in the power grid by 2030.

• Reinforcing Preparedness – 2022 has brought home the need to build energy resilience and to be prepared for severe supply disruptions with appropriate planning. for example: updating of contingency plans and conclusion of outstanding bilateral solidarity arrangements between neighbouring countries.

What the REPowerEU Plan Reveals

The response in the REPowerEU plan is revealing about the strengths of the EU. It demonstrates an ability to:

• Quickly respond to a complex crisis.

• Leverage off existing plans – if the Green Deal had not been in place and working towards the climate goals, there would have not been the foundations for the development of the REPowerEU plan.

• Harness the solidarity and resources of Member states for the collective good.

• Quickly translate strategic objectives actions into concrete actions and science-based targets and then fitting them into a rules-based system.

The question is of course though, will it work?

For now, gas supplies have been secured and stored even though supplies from Russia have dwindled and as a result fears regarding energy shortages this winter have receded. This has been reflected in the fall of the wholesale price of gas in EU as of mid-November 2022, See Fig 1.

Fig 1. Natural Gas EU Dutch TTF (EUR/MWh) Prices

Source: Trading Economics

Time will tell as to how effective these actions have been as we look to the winter of 2023.

Influence of REPowerEU Plan

An example of how REPowerEU is being considered within plans for the development of the renewable energy sector in Ireland is shown by the comments of Pat Keating, CEO of Shannon Foynes Port, at the launch of their Masterplan to put Shannon Foynes Port on the path to becoming an international floating offshore wind energy hub. He stated:

“This report comes at a critical moment, and we are delighted to have Bechtel supporting us. This is a roadmap for what is required to deliver the unique floating offshore wind opportunity that exists for this region, Ireland and, indeed, Europe because of the unique confluence of assets here on the Estuary and west coast. The mix of our world-class wind resources and the natural infrastructure, not least our deep sheltered waters, for a global manufacturing and industry base adds up to what is an unprecedented opportunity that we must capitalise on urgently to address climate change. To fully unlock these significant opportunities there are national policies in several sectors that require updating. Examples include more clarity and urgency around energy policy, enduring regime, alternative fuels, and wider economic and social policies.”

Mr Keating further added: “Through its REPowerEU Plan, which is about reducing dependence on Russian fossil fuels and fast-tracking the green transition, the EU is looking to its member states for solutions.  Thankfully, Ireland has such a solution here on the Shannon Estuary and West coast, potentially one of the most significant responses from any member state.”

Conclusion

The EU Commission Communication on the REPowerEU Plan concluded by saying -

“The time to reduce Europe’s strategic energy dependence is now. REPowerEU accelerates diversification and more renewable gases, frontloads energy savings and electrification with the potential to deliver as soon as possible the equivalent of the fossil fuels Europe currently imports from Russia every year. It does this with coordinated planning, in the joint interest and with strong European solidarity.

There is a double urgency to reduce Europe’s energy dependence: the climate crisis, severely compounded by Russia’s aggression against Ukraine, and EU’s dependence on fossil fuels, which Russia uses as an economic and political weapon.”

The REPowerEU Plan was adopted and has been implemented robustly over the course of 2022. It has allowed EU Member states to be energy prepared for this winter and shows the value of EU membership and the importance of European solidarity. However, a lot more actions are required to be successfully implemented to achieve the twin aims of the elimination fossil fuel dependency on Russia and the acceleration of the green transition.

Author: Enda Twomey- ESG, Culture and Risk Consultant.

The views expressed in this article are the personal views of the author and not those of the IOB. This article does not constitute and should not be regarded as legal or regulatory advice.