How Europe Can Break Its Dependence on Russian Energy

(Bloomberg Opinion) -- As if the pandemic and rising inflation weren’t enough, Europeans face another source of wintry discontent: an energy crisis. A supply crunch has caused the price of power to hit record highs, just in time for the coldest season. It also risks exacerbating a worrying situation in Ukraine. With Russia massing forces on the border, Europe’s dependence on Russian gas limits the West’s options for stopping an invasion. 

Europe’s leaders need to respond. Reducing imports of Russian gas and improving access to alternative sources will benefit the region as a whole and help the climate, too. That means investing further in gas storage and other infrastructure, accelerating the adoption of renewable energy, and expanding the use of nuclear power. By coordinating policy more closely, European nations can build a more sustainable energy sector and prevent Russian President Vladimir Putin from using energy as a weapon to divide the West.

As Europe eases out of coal and its gas deposits age, domestic production is ebbing and the need for overseas purchases is increasing. Europe has made progress in using regulation to reduce the clout of giant Gazprom PJSC, but Russia remains its largest supplier, accounting for nearly 47% of natural gas imports into the European Union in the first half of this year. Dependence is particularly high in Central and Eastern Europe. Gazprom also has significant capacity in European underground storage, particularly in Germany, giving Moscow even greater leverage over the continent’s ability to cope with volatile markets and disruptions.

That influence will rise with the completion of the Nord Stream 2 pipeline, which will transport gas under the Baltic Sea to Germany. Although the project will improve Gazprom’s capacity to directly supply Western Europe — and hence in theory ease future energy shortages — it will also increase Russia’s hold on European supply and (perhaps counterintuitively) leave the EU more vulnerable. At a minimum, Germany’s new government should ensure the certification process for the pipeline remains on pause while Russia continues to threaten Ukraine.

The continent’s energy challenges, however, go beyond the current standoff. So long as natural gas remains crucial for heating and industrial uses, Europe will need to support unglamorous priorities like boosting energy efficiency, improving liquefied natural gas infrastructure, and particularly expanding gas-storage capacity, which remains uneven across the continent and makes it harder to buy when prices are cheap.

Most important, governments should accelerate adoption of cleaner energy. Advancing the EU’s existing proposals to boost zero-emissions hydrogen would help wean countries and industries off natural gas, as will additional storage for energy generated from renewable sources. But as countries such as France, the Netherlands and the U.K. have recognized, boosting Europe’s energy independence — not to mention meeting its climate goals — simply isn’t plausible without a significant new investment in nuclear power. Nuclear is already part of Poland’s plans to cut coal and can help others to do the same. Leaders in countries where it faces skepticism, such as Germany, need to do more to dispel misconceptions about the risks and costs involved, especially as safer, smaller reactors come online.

Europe can’t break its dependence on Russian gas overnight, but it can avoid being held hostage. By adopting a coordinated strategy to diversify its energy resources, European leaders can reduce both their vulnerability to supply disruptions and Putin’s ability to inflict harm.

Editorials are written by the Bloomberg Opinion editorial board.

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