Deals of a lifetime: Why the EU should include renewables in its response to the energy crisis
European leaders are realising that short-term fixes on gas supplies have long-term implications. They should include renewables in their deals with new suppliers to speed up the process of decarbonisation.
Images of ministers in perma-meeting on the energy crisis and emerging bleary-eyed from talks – exhausted but still convinced an agreement is possible – are becoming all too familiar. Despite talks lasting all night, European leaders left a Prague summit on the challenge last week without an agreement on gas price caps. They will pick up where they left off at the European Council and EU energy ministers’ meetings in a few days’ time. And, in anticipation of yet more unfinished business from those forums, the Czech presidency of the Council of the European Union is planning another extraordinary energy summit with leaders in November.
But under the surface something is shifting. And, if mishandled, it could lock Europeans into gas dependence for longer than necessary and slow the transition to renewables.
The context of the recent and forthcoming meetings is different from that during the summits immediately after Russia’s full-scale invasion of Ukraine. Back then, discussions among European leaders reflected a mindset that the need to cut off cooperation with Moscow would be relatively short lived. This resulted in temporary fixes to replace the 40 per cent of the EU’s gas that it imported from Russia. However, Europeans are now coming to terms with the fact that this new geopolitical situation is here to stay.
President Vladimir Putin’s ‘partial’ mobilisation and declaration of war on the ‘Western-dominated’ international order laid to rest any remaining hopes in European capitals that cooperation with Moscow might restart in the next few years. This brings a new layer of complexity to European leaders’ deliberations. They can no longer labour under the illusion that there is a ‘short term’ – during which they can make interim deals on fuels such as gas on the way towards decarbonisation – and then a ‘long term’, in which they fully implement the European Green Deal. Instead, their current responses to the crisis are already shaping their long-term energy outlook.
The EU’s gas suppliers, from Norway to the United States and Canada, are seeking to renegotiate their terms in line with the new realities of the energy market. Representatives from supplier countries in the southern Mediterranean report in private that they feel much more relaxed about the possibility of their fossil fuels becoming stranded assets than they did a year ago. And all suppliers are including infrastructure commitments in their deals to scale up the amount of gas they can send to the EU. The talks between German chancellor Olaf Scholz and Canadian prime minister Justin Trudeau this summer were just one high-profile example of this trend.
Governments need to be able to justify every penny of this investment to their citizens. People are fearful about spiralling living costs, and they need reassurance that their leaders are making cost-effective deals that genuinely contribute to sustainable energy security. This has provided increasing momentum to the idea of joint gas purchasing – through which EU member states can secure better deals collectively due to economies of scale. But governments also need a clearer picture of the myriad ways in which the agreements they are currently making lock them in for the long term.
This is why the European Council on Foreign Relations will soon launch an online tracker of energy deals that the EU member states, individually and collectively, are making with third countries. ECFR has so far received responses from two-thirds of the EU27 countries. Our initial analysis shows not only that Europeans are actively seeking alternative energy suppliers to diversify away from Russia, but also that they are looking for them in very different places.
Alongside Norway, the United Kingdom, the US, Canada, and Australia, Europeans are reaching out to Middle Eastern and North African producers (such as Qatar, the United Arab Emirates, Algeria, Libya, and Egypt) and suppliers in other parts of Africa (including Angola, the Democratic Republic of the Congo, and Benin), as well as Azerbaijan and Israel – with both Brussels and member states taking the initiative in different instances. Several of the deals would require new infrastructure, such as liquefied natural gas terminals or new pipelines. And only a minority includes any component on renewables.
Europeans are clearly facing some tough decisions to get through the next few winters. But EU member states should incorporate plans to massively scale up renewables into the third-country relationships they are cementing now. This is how the EU can guarantee its energy security in a sustainable way: by building up a strong energy and climate diplomacy that will underpin the co-innovation, development, and supply of technology for the EU renewables industry. Indeed, this diplomacy would also help secure supplies of clean energy to supplement what the EU can produce in the post-fossil fuel era.
The EU should not allow geopolitics to delay the process of decarbonisation. Instead, it should use it as a spur to hasten the transition. In a tight economic environment, with citizens worried about how they will cope during the impending recession, governments simply cannot afford too many sunk costs. European leaders can expect a ‘winter of discontent’, with disagreements across member states on how to handle the increasingly difficult choices Putin will lay before them. To bind the European public into a firm EU response to his abhorrent war, leaders will need to be clear that only a sustainable energy strategy can bring long-term security. They should therefore prioritise the ambition set out in the RePowerEU initiative to speed up the expansion of clean energy. And they should do so now – sticking determinedly to the path they chose with the launch of the European Green Deal.
The European Council on Foreign Relations does not take collective positions. ECFR publications only represent the views of their individual authors.