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IEA’s 10-Step Plan For Europe: Diversified Gas Imports And Clean Energy

  • IEA presents 10-point plan to cut Europe's reliance on Russian gas imports.
  • Europe only has around seven months before the start of the next winter season.
  • IEA: fast and significant buildup of wind and solar generation capacity could reduce Europe's demand for Russian gas by 6 billion cubic meters within a year. 

The green energy push in Europe has these days been overshadowed by events in Ukraine but it has not completely left the spotlight. On the contrary, EU officials have been adamant that the transition must continue despite the growing body of evidence that the continent—or the union that takes up most of it—cannot cope with renewables only. The International Energy Agency, never far from yet another bold energy transition declaration, first coordinated a planned release of 60 million barrels of crude to try and lower international oil prices, and then issued a 10-step plan to reduce the EU's energy dependence on Russia. The plan, the IEA noted, would not only make Europe less dependent on Russian oil and gas but would also help move along the EU's climate targets.

According to the agency's head, Fatih Birol, "The IEA's 10-Point Plan provides practical steps to cut Europe's reliance on Russian gas imports by over a third within a year while supporting the shift to clean energy in a secure and affordable way. Europe needs to rapidly reduce the dominant role of Russia in its energy markets and ramp up the alternatives as quickly as possible."

According to the French Minister for Ecological Transition, "More than ever, getting rid of Russian fossil fuels and of fossil fuels in general, is essential. What is at stake is both the need to accelerate the fight against climate change, and, as we can see now, the short-term energy security of the European continent. The 10-Point Plan proposed by the IEA today will enrich our thinking."

And according to the European Commissioner for Energy, Kadri Simson, "Reducing our dependence on Russian gas is a strategic imperative for the European Union. In recent years, we have already significantly diversified our supply, building LNG terminals and new interconnectors. But Russia's attack on Ukraine is a watershed moment. Next week, the Commission will propose a pathway for Europe to become independent from Russian gas as soon as possible."

Related: Saudi Arabia Significantly Raises Crude Prices To Key Market Asia
So, how does the plan look? For all the praise it received from European officials, the plan actually offers little in the way of practical anything. The first step of the plan states, "Do not sign any new gas supply contracts with Russia," and this is the most practical step in the text.

Not signing any new contracts for gas deliveries with Russia is simple and easy enough to do. It's the next steps that get tricky. One of them, for instance, suggests replacing Russian gas supplies with supplies from alternative sources. What these sources would be and whether they would be able to fill the gap left in Europe by the suspension of Russian gas remains an open question.

Of course, there are few candidates for the task, and these include Norway and Azerbaijan, if we're talking about pipeline gas, and the United States, Australia, and Qatar, if we're talking about LNG. None of these countries could fully replace Russian gas this winter even though they did try hard, especially the United States.

The plan of the IEA calls for a reduction of Russian dependence within a year, but the next winter season begins roughly seven months from now. That's far from enough for U.S. or Australian, or Qatari LNG producers to ramp up production enough to cover the EU's needs. The cost factor is also important but isn't mentioned in the plan: LNG costs more than pipeline gas—who's picking up this tab?

Related: Oil Ends Wildest Week Ever As Russian War In Ukraine Rattles Market

Another step proposed in the plan, hardly surprisingly, is the fast and significant buildup of wind and solar generation capacity. According to the IEA, this buildup—for which the agency doesn't mention specific numbers—would reduce Europe's demand for Russian gas by 6 billion cubic meters within a year.

Europe has been building its wind and solar generation capacity for years now. Some countries have boasted that on certain days they had been getting all their energy from wind and solar. And that same Europe plunged into a massive energy crunch last autumn when there was not enough wind and solar power output began to decline as the earth moved around the sun as it does every year, bringing winter to the northern hemisphere.

Yet even if wind and solar did not have an intermittency problem, the bill for this new massive buildup of capacity would be a lot higher than it might have been just a couple of years ago. Thanks to ambitious government goals and no less ambitious metals and minerals demand projects resulting from these government goals, the prices of metals and minerals—and polysilicon—are soaring. Sanctions against Russia are not helping at all, either, as the country is a major supplier of things like aluminum, steel, and nickel. All these are key for wind and solar installations.

So, what the IEA is proposing to the EU to make it less dependent on Russian gas is the simplest thing, that is, stopping the import of Russian gas. That's as far as the practical advice goes. The rest of the IEA's plan is more theoretical than practical and, more importantly, quite expensive. As one industry observer said recently on Twitter, the EU has painted itself in the corner and is contemplating using more paint.

By Irina Slav for Oilprice.com

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  • Mamdouh Salameh on March 05 2022 said:
    This is one of the IEA’s Fatih Birol's la-la-land plans. It is futile, impracticable, simplistic and full of contradictions.

    When he suggested his net-zero emissions 2050 roadmap last year, he called for the immediate halt to any new investments in oil and gas. But when the European Union (EU) got embroiled in an ongoing damaging energy crisis of its own making abetted by the IEA, he changed course and called for the world to increase investments in oil and gas and for OPEC+ to raise its production.

    The IEA’s 10-step plan for Europe boils down to stop signing new contracts for Russian gas. The rest of the plan is more of a wishful-thinking and therefore impractical.

    The EU will remain dependent on Russian gas supplies for at least the next ten years unless Russia decides to switch all its exports to China the world's largest energy market.

    The reason is that all alternative potential suppliers can’t provide enough supplies to replace Russian supplies for the foreseeable future.

    Norway for instance can’t increase its supplies to the EU beyond the current level. Moreover, the maximum volume of gas piped through the South Gas Corridor (SGC) pipeline from Azerbaijan to the EU via Turkey can’t be increased beyond 20 billion cubic metres per year (bcm/y) which is the capacity of the of the gas pipeline. Furthermore, there is a limit to how much major LNG suppliers like the United States, Qatar and Australia can expand their LNG production capacity in the next five years to satisfy rising demand from both the Asia-Pacific region and the EU.

    The truth of the matter is that the combined LNG exports of the United States, Qatar and Australia and also Norway’s gas exports can barely replace the 200 bcm of Russian piped gas supplies annually and 15-16 million tonnes of LNG now or even in ten years from now. Furthermore, the EU has limited import capacity of LNG.

    Iran neither has major pipelines to ship its gas to Europe nor has an LNG export capacity. It will take years before Iran is able to ship its gas to the EU.

    Then there is the cost factor. LNG prices can never ever match Russian piped gas. Who is picking up this tab? This will impose a very heavy burden on the EU budget given the level LNG and gas prices and the fact that the global gas market will be facing shortages for years to come and a cut-throat competition between the Asia-Pacific region and the EU.

    Accelerating wind and solar power capacity deployment is easy said than done because of their intermittent nature. Europe has been building its wind and solar generation capacity for more than 30 years and more than $6 trillion have been spent in the last 10 years on renewables. Yet, the EU plunged into a massive energy crunch because of the intermittency of renewables. The EU utilities have had to resort to coal-fired electricity because of rising gas prices. This could happen time and again. To this could be added the rising costs of a build-up of new capacity.

    Nuclear energy faces huge opposition from Germany, the EU’s largest economy and many other members.

    My conclusion is that the IEA’s plan to reduce the EU’s dependence on Russian gas supplies is as futile and unachievable as its discredited net-zero emissions 2050 roadmap.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Lyle Stevick on March 05 2022 said:
    We could build out renewable commodity production a lot faster, polysilicon, and its competitor thin film semiconductor, and lithium.
  • David Carey on March 05 2022 said:
    Do not think leaders in Europe really have an understanding of how fundamental energy is to the economy - it supports everything else rather than the other way around. The whole of Europe other than perhaps Norway is facing major problems of viability going forward if they do not manage to sort out their disagreements with Russia. You cannot support 500 million people on solar and wind or maintain anything resembling a developed economy.
  • DoRight Deikins on March 14 2022 said:
    « ... the plan actually offers little in the way of practical anything. The first step of the plan states, "Do not sign any new gas supply contracts with Russia," and this is the most practical step in the text. »

    Cost and intermittency, life expectancy, maintenance, and ROI are all difficult problems. And we now have NIMBY protestors (Not In My Back Yard) for wind and solar placements. "What? Destroy my vista by those turbines? Not happening here! I paid good money for this view and AND I pay LOTS of taxes!"

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