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New Energy World
New Energy World embraces the whole energy industry as it connects and converges to address the decarbonisation challenge. It covers progress being made across the industry, from the dynamics under way to reduce emissions in oil and gas, through improvements to the efficiency of energy conversion and use, to cutting-edge initiatives in renewable and low carbon technologies.
The invasion of Ukraine compelled governments to improve energy security by extricating themselves from Russian supplies. But Russia is an entrenched and indispensable player in the global energy sphere and its key materials for the energy transition, including nuclear materials and expertise, will protect its energy superpower status, writes Sara Siddeeq.
Russia’s invasion of Ukraine last year precipitated a series of global challenges, from soaring energy prices, upended supply chains, and the pressing need for some countries to diversify their energy mix. In the West, this had the unintended repercussion of intensifying government efforts to accelerate the energy transition.
This transition would steer nations away from heavily polluting fuels, provided by a limited number of international suppliers, towards low-carbon energy sources such as renewables and nuclear energy. It has been embraced by Europe in particular, which felt the aftershocks of the war most acutely due to its reliance on Russian imports.
From 2021 to 2022, Russian President Vladimir Putin leveraged oil and gas to exert pressure on Europe, thereby triggering a global energy crisis, both in the lead-up to and the aftermath of the invasion of Ukraine. This manoeuvre incited a short-term surge in coal usage for heating and power, resulting in an increase in greenhouse gas emissions globally.
Nevertheless, in the medium to long term, Putin’s energy crisis has expedited the pivot away from traditional fossil fuels. The International Energy Agency (IEA) now predicts that global fossil fuel use will peak around 2027.
Europe’s urgent shift away from Russian natural gas, paired with reductions in Russian oil imports, decreased its share of the continent’s energy mix supply from 40% in 2021 to a mere 7.5% by the end of 2022, and prompted a rush to invest in renewable and nuclear energy.
SolarPower Europe reports that Europe’s solar capacity saw almost a two-fold increase in 2022, and for the first time in history, its wind and solar combined generated 22% of total electricity – more than natural gas.
Nuclear power is also experiencing a resurgence, with countries like Poland, Estonia, Czechia, the Netherlands, the UK and others planning new nuclear plant construction. Meanwhile, IEA findings show that sales of heat pumps rose by nearly 40% across Europe in 2022.
Germany, Europe’s industrial powerhouse which relied heavily on Russian gas a year ago, is now on track to phase out fossil fuels entirely by 2045. Berlin is also reconsidering its post-Fukushima aversion to nuclear energy.
The paradox of sanctions and the transition
Russia’s use of hydrocarbons as an economic weapon has hastened the West’s transition to clean power and heating, well ahead of projections. However, the uncomfortable truth remains that Russia cannot be side-lined due to its enormous energy potential.
Despite its aggression towards Ukraine (and other states) and the West’s attempts to exclude it from energy markets through sanctions, price caps, market shifts and new investments in renewables, Russia remains one of the world’s energy superpowers.
The West’s multiple rounds of sanctions against Russia were carefully crafted to avoid a swift termination of energy exports. Russian energy was too important to be readily forfeited by the markets. The world, and Europe in particular, was not prepared to immediately cease reliance on Russian oil, gas, diesel, coal, uranium and other energy resources. Paradoxically, Europe’s emancipation from Russia’s energy influence initially hinged on the procurement of both Russian and non-Russian LNG, the latter initially destined for Asia but redirected as Russian gas supplies veered eastward.
The US spearheaded the initial retaliation against Russia’s full-scale invasion of Ukraine in February 2022, by imposing a largely symbolic embargo on Russian energy commodities in March 2022. Poland followed suit by sanctioning Gazprom, Russia’s energy behemoth, in April 2022.
However, the European Union (EU) only implemented firm restrictions against Russian energy exports in December 2022, with a price cap of $60/b imposed on Russian crude oil. Starting from February 2023, the EU ceased the import of Russian oil products, mainly diesel. As for natural gas, Russia expedited the process by almost entirely halting pipeline exports to Europe by August 2022. Europe subsequently increased its imports of Russian LNG and coal, but by and large, the continent has now largely reduced its dependence on Russia’s energy exports.
Despite the nation’s recent aggressive actions, Russia’s position as an energy superpower is unlikely to diminish. The country’s expertise in nuclear power, coupled with its abundant mineral resources, guarantees its continued importance in the worldwide shift to clean energy.
Russia’s nuclear dominance
Nevertheless, Russia remains integral to the transition. The country plays a pivotal role in nuclear power generation – an essential element in achieving zero-carbon power. It is also a significant supplier of the minerals vital for large-scale decarbonisation.
Nuclear power is included in most net zero pathways as essential for meeting the growing energy needs of an expanding global population. Approximately 60 new reactors are under construction in 15 countries, primarily in Russia, China and India. Moreover, an additional 100 reactors are on order or planned, with 300 more proposed. While most of the activity is concentrated in countries with established nuclear programmes, numerous newcomers are looking to get involved.
This nuclear revival relies on uranium, of which Russia possesses 8% of known deposits. While this may seem negligible compared to the combined 43% owned by Australia and Kazakhstan, Russia also controls 40% of the world’s uranium conversion capacity and 46% of global enrichment capacity.
In 2021, the US sourced 14% of its uranium from Russia and utilised Russian enrichment services for 28% of its needs. Europe obtains 20% of its uranium and 26% of enrichment services from Russia.
Countries currently operating Russian VVER nuclear power plants, such as Ukraine, are facing challenges, as only one company outside Russia manufactures the necessary fuel. Russia’s dominance of the nuclear industry shows no signs of waning, with half of nuclear power plants currently under construction being Russian models in countries like Turkey, Bangladesh and Hungary.
Challenges of Russian energy influence
The foreseeable future seems to hold similar challenges. A considerable portion of the emerging wave of US nuclear technology, upon which the aspirations of the US to regain nuclear leadership from Russia and China are pinned, depends on a type of high enrichment level fuel known as HALEU.
The US Department of Energy (DOE) projects that demand for HALEU will reach 40 t/y by 2030. The problem is, HALEU is exclusively produced in Russia. Already, TerraPower, a company endorsed by Bill Gates, was obliged to defer the debut of its Natrium Sodium-Cooled Fast Reactor in 2022 due to a HALEU fuel shortfall.
In light of this, sanctioning Russia’s nuclear sector remains improbable. If the West is genuinely committed to fully ostracising Russia economically or advancing the energy transition, it must, at the very least, expand its own enrichment capabilities. The DOE is actively investing in US enrichment prospects, and the European Atomic Energy Community, Euratom, is also contemplating alternatives for the continent.
However, these developments take time. Construction alone can span years, and the full process of uranium mining, conversion and enrichment takes at least a year. Unfortunately, current global fuel supplies are projected to last no more than 18 months.
Other countries could potentially accelerate the process, but they are constrained by non-proliferation and nuclear safety standards. These standards, revered as the ‘gold standard’ of nuclear regulation in the US, have effectively inhibited any large-scale nuclear development in the country for 40 years. In the meantime, Russia’s nuclear supremacy continues, as does its central role in the global nuclear industry.
Furthermore, Russia’s energy influence extends to many of the metals and minerals vital for the energy transition, namely zinc, silicon, nickel and copper.
China and Russia lead in silicon mining globally, and Russia, home to Norilsk Nickel, the world’s largest producer of high-grade nickel, ranks third in nickel exports. For instance, Germany imports nearly 40% of its nickel from Russia. Russia also trades palladium and is a significant exporter of copper. Lithium, the primary element in lithium-ion batteries that power electric vehicles, is one of the few energy transition minerals where Russia is not a major player. However, Rosatom, Russia’s state nuclear energy corporation, is working to address that gap.
In contrast to the nuclear sector, the Western world has largely sanctioned Russia’s commodities trade or imposed hefty tariffs. However, this has made the metals and minerals necessary for the energy transition harder to obtain and substantially more costly.
Russia’s incursion into Ukraine has triggered a surge in commodity prices, with a rise of over 50% since February last year. As a result, zinc, nickel and other metals reached record prices. These price hikes have further aggravated some of the energy transition difficulties and delays caused by China’s supply chain disruptions due to its COVID-19 lockdown, which led to global shortages in wind turbines, solar panels and their components.
Energy transition amidst political turmoil
Russia’s role in the clean energy transition presents a complex and challenging landscape for policymakers to navigate. Despite the nation’s recent aggressive actions, Russia’s position as an energy superpower is unlikely to diminish. The country’s expertise in nuclear power, coupled with its abundant mineral resources, guarantees its continued importance in the worldwide shift to clean energy.
This ongoing reliance on Russia poses potential risks, as the nation could once again manipulate its energy influence to exert pressure on other countries. And next time there might not be alternative options available.
As Europe strives to reduce its dependence on Russia’s energy resources and accelerate the shift towards a cleaner, more sustainable energy future, governments the world over must delicately balance their efforts to avoid unintentionally impeding the clean energy transition or compromising climate goals.
Western attempts to sanction Russia’s energy industry have yielded mixed outcomes, and in certain instances, have inadvertently hindered the clean energy transition. For example, sanctions on Russia’s commodity trade have rendered the metals and minerals essential for clean energy technologies pricier and more difficult to acquire. This situation has led to setbacks in the deployment of renewable energy and a slowdown in the overall transition.
As policymakers grapple with how to address Russia’s role in the clean energy transition, they must meticulously consider the potential repercussions of their actions.
Global collaboration is key to successfully navigating the complexities of Russia’s role in the clean energy transition. Through united efforts, nations can devise strategies to reduce reliance on Russian energy resources, invest in clean energy technologies, and foster a more secure and sustainable energy future for all.
Governments worldwide must persistently prioritise and accelerate the clean energy transition, investing in renewable energy, electrification and energy efficiency measures. By doing so, they can reduce their dependence on Russia’s energy resources, promote energy security and make strides towards climate objectives.
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