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Energy
OpinionComment
Marcella Chow
Marcella Chow

Macroscope | How Europe’s energy crisis could spur faster shift to renewables

  • Rising inflation amid shrinking gas supplies from Russia is pushing Europe to the brink of recession, but there could be a long-term silver lining
  • Europe’s response includes measures to accelerate the shift to renewable energy sources and remove hurdles that slow new projects

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Solar panels are seen above an apple tree plantation in Gelsdorf, Germany. Long periods of sunshine took solar power generation in Europe to a record high this summer, helping reduce the need for gas imports at a time of sharply rising fossil fuel prices. Photo: AP
Marcella Chow
European inflation has hit record levels in recent months, with the consumer price index in the euro zone rising 9.1 per cent year on year in August. The epicentre of this rapid rise is the energy supply shortage caused by Russia’s invasion of Ukraine.
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Reduced gas supplies stem from policy initiatives such as the European Commission’s REPowerEU plan to reduce the bloc’s dependence on Russian gas by two-thirds this year. This was further exacerbated when Moscow cut supplies to countries that refused to settle payments in Russian roubles and its halting of Nord Stream 1 gas flows.

Although prices have eased recently, Dutch natural gas futures prices are still up close to 300 per cent, relative to 2021 levels. This rise in inflation has eroded household spending power as well as consumer and business sentiment in Europe, pushing the region to the brink of recession.

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To fully grasp the issue, it is helpful to look at how dependent each major European economy is on Russian gas supplies. Finland (92 per cent), Germany (59 per cent) and Denmark (52 per cent) were the most reliant among all European economies on Russian gas imports as a share of their total gas consumption before the war in Ukraine.

It’s also important to look at the percentage of gas in total energy consumption. In 2021, gas constituted a large portion in Italy (42 per cent), the UK (40 per cent) and the Netherlands (34 per cent).

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