Sky-high oil prices and extreme volatility have exposed the fragility of the world’s dependence on fossil fuels.
Last week, oil prices reached a 14-year high, topping last month’s seven-year high. Investors anticipated a European and, now implemented, US ban on Russian imports following the invasion of Ukraine.
This price spike has reignited important conversations about the need to invest in alternative energy sources.
These conversations began almost three decades ago. However, fossil fuels still provide around 85% of global energy and nearly half of the European Union’s natural gas imports continue to come from Russia. Nations’ overreliance on fossil fuels, and under-investment in alternative energy sources in recent years, is now having disastrous consequences across the continent.
The UK government has confirmed an energy price rise throughout this year. In Germany, analysts are already sounding alarm bells about the possible impacts of limited gas reserves across Europe in the upcoming winter.
Acting now to diversify the global energy mix and decrease our dependency on vulnerable fossil fuels won’t halt the immediate crisis. But it will open the possibility of a future where energy is not a commodity that can be weaponised by political strongmen against global citizens.
There are some concerns that the war in Ukraine could make the shift away from fossil fuels more complicated.
Short term, countries may have little choice but to rely on fossil fuels to keep their economies moving, which threatens to derail the transition to renewable energies.
Long-term, the choice is clear.
Only by investing in renewable energy sources can states guarantee their energy security. This sentiment is reflected in the EU’s strategy to cut Russian gas dependence.
The twin pillars essential to making this vision a reality are investment and co-operation.
Verbund, Austria’s largest electricity provider, is a prime model. The company generates 95% of its energy from renewable sources, with a vision to invest 5 billion euros in projects that will lower carbon emissions throughout the next decade. It has already begun to meet this ambition, last year the provider invested half a billion euros in a CO2-free power plant.
Efforts to spur investment have also come from the public sector. Prior to Russia’s invasion of Ukraine, the German government vowed to attract $1bn in private investments and provide $245mn in support to help Ukraine transition into greener practices.
The International Energy Agency (IEA) estimated that $755bn was spent on clean energy technologies worldwide in 2021. This is a positive step, but a far cry from the $27 trillion that IRENA have estimated will need to be found to meet the proposals set out in the Paris Agreement.
Isolated investment is not enough to achieve the level of transformation that is required to fundamentally shift global dependence on fossil fuels.
We need to create opportunities for businesses, governments, and international organisations to come together and learn from one and other.
Conferences, such as the World Utilities Congress, which will be hosted by UAE energy company TAQA in Abu Dhabi later this year, and the Berlin Energy Transition Dialogue, to be hosted later this month, will play an important role in transforming energy transition conversation, into action.
Conferences like these will provide an important platform for industry leaders and policy makers to agree plans that will shape the future of the energy industry and ensure unified progress.
Whilst the global focus rightly remains on securing the safety of those impacted by the invasion of Ukraine, the shock to the global energy system is a wakeup call that cannot be ignored, and the response must reflect the severity of the situation.
We must approach the energy crisis as the emergency that it is. We must demand more committed action to diversifying our energy mix than we have ever seen before.
Cyril Widdershoven is a veteran global energy market expert and founder of Verocy. He holds several advisory positions at various international think tanks and Western energy firms.