Summary: Russia’s invasion of Ukraine has triggered a quick and profound reorientation of energy policy in Europe. Unsurprisingly, the short-term policies include unprecedented measures to diversify gas supply. By contrast longer-term policies have mainly focused on accelerating the green transition. The Russian gas crisis opens the possibility that the region will accelerate its shift to green energy.
Why this is important: Transitioning to greener alternatives is a viable alternative to Europe's energy (fossil fuel) import dependence.
The big theme: Transitioning from fossil fuel use to cleaner alternatives is a really important element of nearly every government’s net zero policy. But in most cases, there is little detail on the “how we will get there”. For investors, this is an important topic. It’s very possible that direct supply suppression (i.e. stopping new oil and gas exploration) at any sort of scale, will turn out to be just too hard. This potentially leaves encouraging the use of greener alternatives as our main transition tool. Aside from the obvious question (when do fossil fuel-based assets become stranded?) it also should lead us to think more about how long greener alternatives might take to reach dominate market shares.
Summary of a story from Bruegel:
Russia’s invasion of Ukraine has triggered a quick and profound reorientation of energy policy in Europe. The aim is to decouple Europe from Russian fossil fuels, while accelerating the green transition. Russia cut about 80% of its gas supplies to Europe during spring and summer 2022, making the reorientation increasingly urgent. Unsurprisingly, the short-term policies include unprecedented measures to diversify gas supply. Several European countries have new gas deals with alternative suppliers of both liquified natural gas (LNG) and pipeline gas, and have started the construction of new gas infrastructure