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Europe is locked into Russian gas – even more so if the new Nord Stream 2 pipeline from Russia to Germany opens for business.SeanGallup/Getty Images

In the fall, when Russia began deploying more than 100,000 troops to Ukrainian border areas, prices for all forms of energy, especially natural gas, rose – and kept rising. The painful energy bills triggered a reassessment of Europe’s energy policies.

How did Europe become so dependent on gas imports? Would the lights go out if Russia were to invade? Did Europe vastly overestimate the ability of green power to fill the energy gap? Was it a mistake to phase out nuclear and coal-fired plants?

These and other questions are gripping governments, utilities and energy consumers alike. While the chances of a full-blown invasion of Ukraine appear to have diminished a bit this week, with U.S. President Joe Biden saying there is still “plenty of room for diplomacy” to end the crisis, European energy markets will have to adapt to the new security and cost reality.

Here are three areas that should be revamped. The big question: When?

Russian gas: too much of a good thing

Gas from Russia is a fact of life in Europe and has been for decades, with Russian imports generally accounting for a third of the total supply. Most of it is delivered through pipeline by Kremlin-controlled Gazprom.

In the short to medium term (assuming no war), nothing much will change because new pipelines take years, sometimes a decade or longer, to build. Even if Europe wanted more gas from Norway, Algeria or Azerbaijan to hedge its bets against Russian gas, it would not be able to get it, at least not quickly. Those countries are already producing gas at full capacity.

“In the short term, the problem is infrastructure,” said Jack Sharples, gas program research fellow at the Oxford Institute for Energy Studies. “Europe would find it hard to import more pipeline gas from anywhere. The good news is that, even if gas relations between Russia and Europe deteriorated, Gazprom could not divert gas from Europe to China because the pipelines don’t exist yet to do so and may not exist until 2030.”

So, in effect, Europe is locked into Russian gas – even more so if the new Nord Stream 2 pipeline from Russia to Germany opens for business (Mr. Biden has vowed to kill the pipeline if Russia does invade). But the story is different for liquefied natural gas (LNG), and it is here that Russia may be vulnerable – and becomes its own worst enemy.

In recent months, declining Russian gas exports to Europe have pushed prices up to crisis levels. Fatih Birol, head of the International Energy Agency, has accused Russia of cutting back supplies despite increased demand because of “heightened political tensions over Ukraine.”

The severe pipeline gas shortages have made Europe turn to LNG to boost supplies. In January, U.S. LNG exports to Europe reached a record high, and more supplies from other big producers, including Qatar, may come if the European market remains tight and Russia makes the mistake of jacking up prices even more. In time, the fledgling Canadian LNG industry, eyeing the enormous potential of the global market, may also come on strong.

“The extra LNG capacity being brought on stream is monumental,” Mr. Sharples said. “American LNG would be the major beneficiary if Gazprom continues withholding volumes from the European spot market, and American supplies would be in even greater demand if Russian pipeline supplies to Europe were to be disrupted because of a geopolitical crisis in Ukraine.”

Frack you: European opposition to gas fracking may crack

Hydraulic fracturing of shale sedimentary rock, known by the inelegant term “fracking,” turned the United States into an energy superpower in recent years; in 2020, the country became a net petroleum exporter for the first time since the era of Harry Truman, who was president from 1945 to 1953. The fracking bonanza has allowed the U.S. to develop a thriving LNG export industry.

Various studies suggest shale gas reserves in Europe, which would use fracking to be put into production, are much smaller than those in the U.S. but are still potentially vast and much greater than the continent’s conventional gas reserves, which are on the wane. Poland, France and Britain are thought to have the greatest amounts.

Energy prices soar as geopolitical tensions over Ukraine intensify

So frack away to reduce the reliance on Russian gas? Nice idea, but it’s not happening – yet. There was a flurry of interest in European fracking after the 2014 Ukrainian gas crisis, when a payment dispute with Russia saw Gazprom temporarily cut off gas supplies to Ukraine. Turning off the taps scared Europe, which saw much of its imported gas travel through Ukrainian pipelines.

But pretty much nothing changed. Many highly populated European countries, including France, Germany and Britain, have banned fracking because of a fear of earthquakes and pollution from injected chemicals. They do not want to see their bucolic rural areas turned into industrial sites. Only last week, Cuadrilla, a pioneering British fracking company, was ordered to shut down its two shale gas wells in Lancashire, England.

With gas supplies at the centre of the geopolitical tensions over Ukraine, it seems unlikely the fracking bans across Europe can last. Already, 30 Conservative backbenchers in the government of British Prime Minister Boris Johnson are calling for the ban to be scrapped. Other European governments may come under pressure to do so, too.

Nukes: Europe picked the wrong time to diss them

On the last day of December, Germany closed three of its six remaining nuclear power plants. The other three will close at the end of this year. Twenty years ago, nuclear power generated 30 per cent of the electricity in Europe’s biggest economy; soon, it will be zero.

Belgium and Switzerland are also phasing out nuclear energy. The timing could not be worse, not only because fewer nukes raises the demand for gas-fired generation – translation: more need for Russian gas – but because it makes it harder for all of Europe to meet its ambitious net-zero emission goals by 2050 (2045 in Germany’s case). Decarbonization and fewer nuclear plants are fundamentally at odds.

A few countries are having second thoughts about ending nuclear power or not expanding their existing nuclear fleets. French President Emmanuel Macron earlier this month announced a “renaissance” for the industry, with plans to build as many as 14 new reactors. Britain has less ambitious plans, although at least half the country’s nuclear capacity is still set to be decommissioned by 2025. Hungary and the Czech Republic also want new reactors as they try to move away from coal.

Whether the Ukrainian mess will accelerate any tentative plans to keep Europe’s nuclear fleet from disappearing is an open question. But it should. Renewable energy is not widespread or reliable enough yet to reduce the dependency on Russian gas or decarbonize the economy quickly. Nuclear energy – lots of it – could.

There is one catch. Rosatom, Russia’s state-owned nuclear monopoly, is a major player in the nuclear export market, currently building roughly three dozen reactors in countries that include Finland and Hungary. The use of Rosatom technology in Europe would, of course, make those reactors vulnerable in any Europe-Russia trade or sanctions war.

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