The development of the Clean Energy sector has historically been significantly impacted by previous energy crises. The war in Ukraine and its major impact on energy markets will be no exception. Sadly, it took a tragedy at our doors for us to come to realize that renewables and energy efficiency are not only about climate change, but also about our independence, freedom, and future prosperity.
History doesn’t repeat itself, but it often rhymes
The first modern global energy crisis took place in the 1973, with the OPEC oil embargo and what we now call the first oil crisis. We can probably consider the 1970s as the birth of renewables as a matter of public interest. Back then, oil majors like BP, Shell… invested in R&D to improve solar photovoltaic technologies. Even Exxon funded Solar Power Corp and had some ad campaigns (“Energy for a strong America”) featuring solar alongside coal and nuclear power. At the end of the decade, after the installation of a solar panel on top of the White House, President Carter praised “the power of the sun to enrich our lives as we move away from our crippling dependence on foreign oil”. (Reading this, it certainly feels like we wasted a few decades). History doesn’t repeat itself…
Much more recently, 2008, a year often referred to as the year of the GFC (Great Financial Crisis), was also crucial for Renewables. Indeed, during the first semester, world oil prices skyrocketed from USD 90 a barrel in January to hit a record high of USD 147 a barrel on 11 July. This “bubble” on oil had huge collateral impacts on the renewables sector, massively accelerating investments across the value chain. This started an incredible period (not over yet) of innovation and technological breakthrough in solar, wind, etc. leading to the collapse in the costs of these technologies and turning renewables into what they are today: the cheapest sources of energy.
To some extent, last year also brought a collection of “mini energy crises”. They got a bit unnoticed because most events that took place did not make the headlines as surging oil prices do, and therefore did not generate the same quick and publicized political reactions. Also, these crises were more local, whereas whatever touches oil rapidly becomes a global concern. In 2021, the state of Texas suffered a major power crisis, as storms caused the worst energy infrastructure failure in the state’s history. China experienced power cuts and factory closures, as utilities got short of coal. Electricity prices in Europe rose to new records with unprecedented volatility and natural gas prices soared like never before. Prophetically, European’s dependency to Russian natural gas was already discussed with the delays of the new Nord Stream 2 pipeline, fears of being short of gas in the middle of the winter, and the rumours that Putin was limiting deliveries on purpose to create political instability within the EU.
This year, the war in Ukraine is taking the energy crisis to a whole new level. Western societies – again – come to realize that they are built on fossil fuels, something that is neither desirable nor sustainable.
Although it is much too early to draw any conclusions from the current catastrophe, one thing that seems quite certain is that the conflict will have significant consequences on how we look at the energy sector.
A whole new energy strategy is needed
COP after COP, IPCC report after IPCC report, warning after warning, politics and governments were already under immense pressure to act in order to limit, as much as possible, the impact of the ongoing climate change.
Most countries have announced their plans, but many observers were left unimpressed. There was still a feeling that the vast majority of decision-makers did not have the required sense of emergency.
But it feels like this time could be different.
As our societies and their prosperity have relied on fossil fuels for more than a century, energy independence should always have been on top of our agendas. Decades of relatively peaceful time (or, to be more specific, of conflicts that were far away from us) gave us a false feeling of security. Western countries have been sleepwalkers and just got the worst wake up call.
This war, given Russia’s critical role both in the global oil and gas markets and as the major natural gas exporter to the supply-constrained EU, obliges us to completely reassess our long-term energy strategy.
How could Europe put its weight in the conflict given its ties with Russia? We come to realize that there is no ‘real’ freedom without energy. The need for energy independence and security has always been there, but it might hit its most critical point during this conflict.
Our best guess at this point is that Governments and countries, whenever they look at their energy strategy, will now all have two common goals: 1) to reach energy independence as quickly as possible; 2) to reduce emissions to combat climate change. The good news, sorry if this may sound inappropriate in current times, is that there is a common solution for both: more renewables.
Accelerated energy transition is the only way out
It only took a few days for the US and the EU to announce measures designed to isolate Russia, reduce its financial resources, etc. Interestingly, in Europe, these short-term measures have been associated with a plan for the long term, called “REPowerEU”, which outlines the EU’s plan to make Europe independent from Russian fossil fuels well before 2030.
Commission President Ursula von der Leyen said: “The quicker we switch to renewables and hydrogen, combined with more energy efficiency, the quicker we will be truly independent and master our energy system.”
To lower gas demand across Europe, the plan calls for accelerated deployment of wind and solar, renewable hydrogen and biomethane production capacity, along with energy efficiency measures (especially heat pumps installation).
We firmly believe that on top of this EU initiative, we are likely to see, sooner rather than later, many countries announcing more ambitious targets. Heavily Russian-gas-reliant Germany being the poster boy of this upcoming new trend with its target to get 100% of its energy from renewable sources by 2035.
Coming to realize clean energy is not only about climate change
In 1962, we had no energy crisis, but the Cuban missile crisis. A crisis that ended peacefully. Kennedy said at the time:
“The cost of freedom is always high, but people have always paid it. And one path we shall never choose, and that is the path of surrender, or submission.”
We are in a different century and we thought this could mean different times. Obviously, we were wrong. Big time. Security, peace and independence should never be taken for granted.
Clean energy is not ‘only’ about decarbonizing the economy (actually this is already a fairly major reason to ‘go for it’). It is strategic. It is crucial for our future prosperity and freedom. And even though the outlook of the sector is brighter than ever, it is sickening that it took such dramatic events for many leaders to realize it.