HOUSTON—Russian President Vladimir Putin may have succeeded where global policymakers failed: speeding up the transition away from fossil fuels.
“I have no doubts that, as far as the EU is concerned, what happened over the past year accelerates the energy transition immensely, and that is the irony—that it’s a clear achievement by Putin,” said Paula Pinho, director at the European Commission’s Directorate-General Energy, on March 7 at CERAWeek by S&P Global. “He is managing to accelerate the energy transition in Europe in ways that we could not have imagined until one year ago.”
Putin’s invasion of Ukraine in February 2022 forced European countries to abandon their high level of dependence on Russia for oil and natural gas. Before the war, Russia supplied 41% of the European Union’s (EU) natural gas. That figure is now just 9%.
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“The measures that are being taken now are, in many ways, irreversible,” said Pinho, who is responsible for energy efficiency and transition, consumers, innovation and energy security. “Even if you see in the future—and we do hope so—a fundamental political change in Russia, there are issues that took place over the past year that cannot be reversed so easily.”
Among them, the rapid deployment of floating storage regasification units (FSRUs) to handle the massive volumes of LNG shipped by U.S. exporters, as well as the unity demonstrated by the EU’s 27 countries.
The commitment to the energy transition is certainly greater than before, said Michael LaMotte, senior managing director at Guggenheim Securities. But that does not eliminate the supply chain and regulatory issues that can still hinder progress.
A key difference in the past year is that policymakers were forced to pay attention to the energy transition, which can help capital flow to where it is needed, particularly to emerging economies.
To make the financial aspect function, credit committees in the U.S. and Europe need to reevaluate how they assess risk so that all of the money available to go to work can actually go to work, LaMotte said.
“We have a huge opportunity to leapfrog and accelerate the transition by bringing the developing world faster into renewables and alternatives, rather than bringing them up through the coal and wood, and oil and gas progression that we did in the U.S. and Europe,” he said. “One of our hopes is that we can actually address this through the World Bank and the other global sources of funds. We can actually manage that cost of capital and get it deployed and bring these economies along through the transition faster.”
In that sense, the potential exists for emerging economies to have an advantage over Russia.
“As long as Putin is in power … access to capital is going to be tight,” LaMotte said.
Access to western capital is just one dilemma for Russia. Another is the loss of western technical capacity.
“The IOCs that ripped thousands of people out of Russia,” said Richard G. Newell, president and CEO of Resources for the Future and former U.S. EPA administrator. “How fast are they going to go back?”
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