bneGREEN: Wind, solar slash gas costs in EU by $12.7bn since Russia invaded Ukraine

bneGREEN: Wind, solar slash gas costs in EU by $12.7bn since Russia invaded Ukraine
/ bne IntelliNews
By by Roberta Harrington in London February 26, 2023

The growth of wind and solar power has helped to cut natural gas costs by €12bn ($12.7bn) in the EU since Russia invaded Ukraine just over a year ago.

The crisis in Ukraine brought to light the high cost of relying on fossil fuel imports. Russia is a major exporter of oil and gas. But the increase in renewables helped to mitigate energy security risks and prevent a worse crisis, says a new report by climate think-tank Ember.

The ‘avoided gas cost’ of €12bn came because of cheap renewables, rising gas costs and a reduction in fossil gas imports of 9bn cubic metres. Without the total 546 TWh of wind and solar generation, the EU could have required an additional 993 TWh (94 bcm) of gas to meet electricity demand since the start of the war. This equates to gas costs of €135bn.

The EU has imported 330 bcm of gas since the war began, with 54 bcm (16%) coming from Russia. While total gas imports have only decreased by 5% (19 bcm) compared to the same period in the previous year, Russian imports have plummeted by 60% (82 bcm).

Prior to the invasion of Ukraine, the EU relied on Russia for around 40% of its imported gas. This has dropped substantially to 16%.

“Russia’s invasion of Ukraine shocked Europe into action. Suddenly, gaping vulnerabilities due to fossil fuel dependence became a stark reality,” said Ember senior analyst Sarah Brown.

“The last year has been a scramble to address these risks through an accelerated transition to a cleaner, more secure power system,” she continued. “At the year marker of Russia’s devastating war in Ukraine, it remains critical that the EU rapidly expands solar and wind to attain permanent energy independence.”

The EU faced enormous pressure in the year following Russia's invasion of Ukraine, as gas prices skyrocketed to an unprecedented high of €313/MWh, causing the cost of producing power from gas to surpass €650/MWh. With coal prices also surging, the increased cost of fossil fuels pushed up electricity prices and triggered escalating inflation and a cost-of-living crisis across Europe, said the report.

The volatility in the energy sector added new urgency to move away from fossil fuels for power generation in the EU.

Wind and solar power have played a vital role in achieving the primary objective of cutting Russian gas dependence, even before the full impact of newly announced EU policies comes into effect. Boosted by growing capacity and favourable weather conditions, wind and solar produced a record level of EU electricity since the start of the war, with their combined generation reaching 546 TWh, an increase of 50 TWh compared to the same period in 2021-22.

Wind and solar power have accounted for 23% of total EU generation since the Russia-Ukraine war began, overtaking the share of gas power, which provided 19%. The record wind and solar generation helped the EU weather challenging conditions in the power sector, as nuclear and hydro generation suffered significant shortfalls across the EU last year due to drought impacts and plant closures. This created a large gap in generation, much of which was met by wind and solar and a fall in demand as fossil fuel prices spiked.

With over a fifth of EU electricity deriving from wind and solar power, progress towards a clean energy system helped to avoid an even worse crisis, said the report. The 50 TWh annual increase in wind and solar alone reduced the amount of gas required for electricity generation by 90 TWh and avoided gas costs of €12bn, based on the average TTF day ahead price for the period. TTF is a gas spot price market location in the Netherlands.

The crisis in Ukraine has fundamentally changed the EU's attitude towards using fossil fuels for electricity, maintains Ember.

EU governments identified fossil fuels as a threat to national security, energy affordability and climate goals in response to the war. The solution to all three is to build more clean power, and faster.

Most European countries have stepped up their renewable electricity ambitions in response to the crisis, announcing higher targets, shorter project timelines and supportive policies. The European Commission's REPowerEU proposal aims to double solar capacity by 2025 under its 45% renewable energy target for 2030 and anticipates 69% renewable electricity by that date.

However, the devastating war in Ukraine continues, and targeting higher wind and solar shares is critical, but more importantly, these greater capacities must be delivered. Only then can Europe displace fossil fuels to achieve lasting energy security and independence, concluded the report.

Moving towards a cleaner energy system is critical to achieving lasting energy security and independence. However, to achieve this goal, the EU needs to deliver on its renewable energy targets and increase its wind and solar capacities. Only then can Europe displace fossil fuels and build a more sustainable, secure and affordable energy system, said Ember.

bneGREEN

Dismiss