The European Commission has unveiled an ambitious plan which will require an extra €210 billion in investments by 2027.
ADVERTISEMENTThe European Union is facing a once-in-a-lifetime dilemma: how to cut its heavy and costly dependency on Russian energy while keeping the lights on for citizens and businesses across the continent.
The sudden reckoning has been prompted by Russia's invasion of Ukraine, a large-scale military operation that is partly bankrolled by the Kremlin's profitable sales of fossil fuels, of which the EU is the number one client.
Last year, the bloc spent almost €100 billion on Russian energy, a figure that has been haunting the 27 since the war broke out. As pressure from Kyiv and other international allies intensifies, the need to slash imports from Moscow becomes a geopolitical strategy of extreme urgency.
With this in mind, the European Commission has unveiled an ambitious and far-reaching plan, aptly coined "REPower EU", to achieve full energy independence from Russia by 2027.
The plan is "fundamentally political", said a senior Commission official, and responds to the pledge that EU leaders made at the Versailles summit in March, when they vowed to "reduce our energy dependencies."
But it is also transformative: for a bloc that has for decades grown accustomed to the cheap and reliable supplies from Russia, a total halt in imports will entail enormous challenges to diversify suppliers, redesign infrastructure, mitigate price hikes, increase efficiency, boost renewable alternatives and, above all, ensure households and factories remain powered without interruption.
"Putin's war is disrupting the global energy market," said Ursula von der Leyen, president of the European Commission, while presenting the plan on Wednesday afternoon.
"It shows how dependent we are on imported fossil fuels. And how vulnerable we are to relying on Russia for importing our fossil fuels."
All eyes on LNG
As Russian coal has already been sanctioned and oil is in the process of being so, the big energy switch hones in on gas, the most politically sensitive fuel.
Russia is the EU's prime gas provider, accounting for 45% of total gas supplies – 155 billion cubic metres (bcm) – in 2021.
Brussels is well aware that this massive amount of gas will not disappear overnight or be replaced by green products, so the top priority is to find gas elsewhere to fill in the gap.
Liquified natural gas (LNG) emerges as the most readily available solution to this quandary. LNG is gas that has been cooled down and is transported by ships, which then unload the tanks in sophisticated terminals that turn the liquid back into gas.
This offers a great advantage for coastal states that have terminals in place, like Spain, Italy and the Netherlands, and can increase their purchases with relative ease. The EU has been breaking records of LNG imports since the start of 2022, reaching 12.4 bcm in April.
However, LNG is expensive and the global market is very competitive, with Asian buyers offering big money for the tanks. It also puts landlocked countries at a disadvantage because they don't have access to ports and are compelled to obtain their gas supplies through pipelines, most of which are Russian-operated.
REPower EU suggests that up to two thirds of Russian gas – around 100 bcm – could be slashed by the end of this year. Half of this – 50 bcm – would be replaced by LNG diversification, while 10 bcm would come from non-Russian pipelines, including those from Norway, Azerbaijan and Algeria.
The EU is now focused on signing deals and partnerships with the leading LNG producers. A recent political agreement with the US is set to provide the bloc with an extra 15 bcm of America-made LNG.
Brussels is also engaged with Qatar, Egypt, Israel and Australia to secure additional supplies and wants to explore the potential of African countries like Nigeria, Senegal and Angola.
The push to replace Russian gas with so much LNG has been criticised by environmental organisations, who say it will prolong the bloc's reliance on polluting fuels and imperil climate goals.
ADVERTISEMENT"The Commission is just searching for new fires to stick its hands in," said Silvia Pastorelli, energy campaigner at Greenpeace EU. "These plans will further line the pockets of energy giants like Saudi Aramco and Shell, who are making record profits on the back of the war, while people in Europe struggle to pay the bills."
27 buying as one
In order to break through the fierce competition for LNG, Brussels would like the 27 member states to buy as one single client and exploit their leverage as the world's largest single market.
The bloc has already set up the EU Energy Platform, a voluntary scheme to pool demand and coordinate imports that met for the first time in early April.
Brussels aims to take this a step further and create a "joint purchasing mechanism", a collective venture to negotiate gas contracts on behalf of member states.
The mechanism would be voluntary and build upon the lessons learned from the procurement of COVID-19 vaccines, which the Commission spearheaded to obtain millions of doses at affordable prices while avoiding a race-to-the-bottom.
ADVERTISEMENTThe idea of joint purchases of gas raised to prominence last autumn, when a power crunch began sending electricity bills soaring. France, Spain, Italy, Greece and Romania had previously voiced their support for centralised procurement, arguing it would bring down prices and strengthen energy security.
"It's very important for all member states, starting with the big countries to be on board," Simone Tagliapietra, a senior fellow at Bruegel, told Euronews.
"This is not going to be good just for the small countries, namely in the East, that might have problem to procure gas in case of a Russian interruption flows. It will safeguard overall energy security in Europe."
Cutting (green) red tape
As gas is a limited, in-demand commodity, the EU needs to find other resources that can compensate for the loss of Russian fuels.
REPower EU is considered an extra layer of the European Green Deal and has a marked focus on renewable energy. The Commission proposes to speed up the deployment of wind and solar systems with the aim of replacing over 20 bcm of Russian gas before the end of the year.
ADVERTISEMENTBut this goal faces the great wall of bureaucracy: on average, wind farms take nine years to be completed while solar panels require from four to five years to be installed. The process is highly complex and entails numerous authorisations related to construction, energy, environment and architecture standards.
In a new recommendation, Brussels asks member states to significantly speed up the process and establish binding maximum deadlines for all relevant stages. Renewable energy becomes an "overriding public interest" that justifies faster permitting.
"Speeding up permitting is a good idea," said Alex Mason, head of energy policy at the WWF EU office. "But the way to do this is to fix inefficient bureaucratic procedures, not weaken environmental legislation. Indiscriminate exemptions from nature laws for renewable energy projects could harm biodiversity and stir up public opposition – causing conflicts and further delays.”
At the same time, the Commission proposes to update the EU's renewable target for 2030, from 40% to 45% of all total energy produced across the bloc, and to make solar panels mandatory in all new public and commercial buildings by 2025 and in all residential units by 2029.
The question of 'behavioural changes'
Independence from Russia energy will require more than LNG and solar panels: the great objective will also need "behavioural changes" in the way Europeans consume electricity.
ADVERTISEMENTAmong the suggestions: use more public transport, reduce the speed on the highway, turn down the heating and air conditioning, work from home and choose households appliances that are more efficient.
"Saving energy is the cheapest, safest and cleanest way to reduce our reliance on fossil fuel imports from Russia," the Commission's document reads.
None of these suggestions are legally binding and echo previous calls made by the International Energy Agency (IEA).
Brussels estimates the adoption of these measures will bring down electricity demand and erase the need for 13 bcm of Russian gas in the short term.
But since the proposals lack legislative weight, it's unclear how much European households and companies, who are dealing with sky-high bills and soaring inflation, would be willing to contribute on their own volition.
ADVERTISEMENTThe Commission intends to work with the IEA, national governments and local authorities to develop information campaigns in a bid to promote energy-efficient attitudes.
A hefty price tag
The magnitude of the transformation envisioned by REPower EU comes, as expected, with a hefty and eye-catching price tag: becoming independent from Russian energy will cost €210 billion in additional investments between 2022 and 2027, the Commission estimates.
Over €110 billion will go to the deployment of renewables and hydrogen systems, while €10 billion will be used to diversify LNG and pipeline gas imports.
In an exercise of financial repurposing, Brussels has proposed the bulk of the money should come from the unused loans of the COVID-19 recovery fund.
When EU leaders agreed to step up the novel instrument in 2020, they split the funds into €312.5 billion for grants and €360 billion for low-interest loans. Since loans had be progressively repaid, the majority of member states forsook them and requested only their allocated share of grants.
ADVERTISEMENTThis has left €225 billion in untouched loans that can now be tapped into to finance the redesign of energy grids. Revenues obtained from the Emissions Trading System could bring an extra €20 billion in grants.
"The combination of new grant money with unused loans can become very attractive," said a senior Commission official, noting the economic challenges posed by the war inevitably require more financing.
Notably, the Commission's cost estimation foresees €2 billion to revamp oil infrastructure.
As part of a new package of sanctions, member states are currently discussing a ban on Russian oil, but the proposal remains stuck as Hungary, a country connected to the Russian-operated Druzhba pipeline, demands a longer phase-out and copious economic help.