It will soon be a year since Russia’s attack on Ukraine. Besides the toll it has taken on Ukrainian lives and livelihoods, there is a huge cost being imposed on countries around the world. In terms of food and energy shortages, and their high prices. Thankfully Ukraine is able to export foodgrains under an agreement signed with Russia, Turkey and the UN, and extended recently. The same can’t be said for energy, which forms the core of the West’s economic sanctions on Russia.
If one looks at the response of western, developed countries to the war and to end Russia’s monopoly on Europe’s gas supply, one can’t help but wonder if any of it is effective and will work to force Russia to end the war. As I wrote in a blog post recently, European countries’ decision to embargo Russian oil and gas was not backed by decisions to find alternative sources of supply to tide Europe over, in the meantime. And when we consider that Europe continued to buy Russian oil and gas through the Ukrainian crisis, including Russian LNG which rose by 20% between March and October 2022, we can see how difficult it is proving to wean themselves off Russian supplies.
As I also wrote earlier, the decision to cap profits of non-gas energy companies, – which would have been renewables mainly – was quite strange since renewables is what you would want to encourage, not just for now but for the future as well. Capping profits of fossil-fuel companies is what makes sense; instead, they are reaping the benefits of high oil and gas demand and short supply.
Which brings me to the main thrust of my piece:
- Rather than trying to fight Russia with an oil embargo and sanctions on their oil and gas industry, wouldn’t it be better to accelerate the shift to renewables, and deprive Russia of demand?
- Instead of viewing the energy crisis through the lens of the Ukraine war, shouldn’t we be looking far ahead into the future and finding ways to reduce the energy-intensity of our economies?
The sanctions on Russia aren’t quite working, since Europe and many other countries across the world – including my country, India – has continued to buy Russian oil, and that too, at deep discounts. Even if we agree that Europe bought itself time during the past year to find alternative supplies of gas, and that its embargo comes into effect at the end of this year, how many such winters of Ukrainian crisis, can Europe insure itself against? Finding alternative sources of oil and gas is necessary, but it too is a weak long-term option, when compared to the possibility of shifting more of our economic activity to renewables.
In this regard, I do think that nuclear energy presents a solution, along with other renewables. France, for example, has managed to stay fairly insulated from this energy crisis, compared to other countries in Europe because almost 70% – 75% of its energy is generated from nuclear. Japan is considering recommissioning more of its phased out nuclear plants, to reduce its massive oil and gas import bill that has only grown since the Fukushima disaster in 2011. And Germany, which made the terrible decision of going off nuclear completely, is the one most dependent on Russian energy supply. As I have said before, Germany and other countries too must consider increasing the supply through nuclear, though with more modern and safe technologies.
This, and increasing the supply through renewables, would take care not only of this winter, or next year’s but would help the world meet its climate targets over the longer term. This would also obviate the need for subsidizing consumers and households’ energy requirements, another decision that I find strange and at cross-purposes with trying to tell households and businesses to reduce energy consumption. Subsidising consumption will only increase it, and keep prices at elevated levels. Much better to direct subsidies to production and consumption of renewable energy.
Looking into the future, or even at the current state of the global economy, more and more of which is shifting to services and also to digital technology, how do we make our economies less energy-intensive? Many argue that the shift to services and the digitisation of economic activity – a lot of which is increasingly internet-based – makes our economies less dependent on energy. I am not sure if we have adequate data to indeed prove these views to be true. The more advanced and developed economies might be reducing their dependence on fossil-fuels (though even that is hard to prove) but I doubt we have become less energy dependent overall.
In fact, I would argue that the digitized, automated, internet-based economy is a 24×7 economy and one that cannot afford even a minute of downtime. That means hundreds of thousands of data servers and machines constantly humming with data activity, round the clock, around the world. I have read that most big tech companies prefer to locate their data servers in countries like Iceland, that have abundant supplies of geo-thermal energy. And what is to say that these machines, or any other using digital and information technology is less energy-intensive?
The world is also shifting to EVs, at an increasing pace than before. What is to suggest that merely by shifting to EVs, we have suddenly become less energy intensive? Nothing. Especially, if you live in India, where the bulk of our energy is still generated from coal. I think that here too, we will always be on the quest for greater energy-efficiency. Just as LED lighting is said to be more energy efficient than the incandescent lightbulb, EVs use a less carbon-intensive technology to run cars. However, just as we looked for the car with the best mileage in the days of internal combustion engines, we will continue to search for the EV with the best range. The phone with the most powerful battery, with the least charging, etc.
I think the time may have come when, along with climate targets and lowering carbon emissions, we also measure the energy-intensity of our economies. As I have written before, China mooted the idea of carbon-intensity of GDP to enable us to measure carbon emissions more fairly and also to set targets that are more realistic. Perhaps the time to start measuring the energy-intensity of our economies is here. It will not be easy since we will be measuring energy usage in consumption and production processes, and we will be measuring them across a wide range of devices and activities; a common metric will have to be found.
From what I saw on Our World in Data’s website, there is an attempt to measure energy intensity of economies, but it does not exactly correspond to what I am talking about here. World Bank and IEA have calculated energy intensity of countries by GDP, but that takes into account only energy on the production side. Then, there is an attempt to measure energy intensity of consumption, per person based on what the country exports and imports. And finally, there is data on fossil fuel consumption growth, which has only increased or stayed steady over time. And that is what we are talking about here, aren’t we? While the US leads annual fossil fuel consumption growth, China and India are quite high up there as well. These are not good signs for our environment and for our energy security as well.
While discussing the future of renewables, we must keep in mind the powerful fossil-fuel lobby that exists around the world, including in the US, supported by Republicans and Trump. There is another consideration, and that is the portability of it. Fossil fuels have been transported and shipped across the world, through pipelines, shipping and floating tankers and terminals. The transport infrastructure is well-established for it. Renewable fuels on the other hand, tend to be highly localised, depending on the availability of sunshine and windy conditions. I have read that hydropower is generated and transmitted into energy grids. But I am not sure that solar and wind energy can be fed into transmission grids and be transported from a place that is surplus to one that is deficient.
While gazing into the future, I cannot help but marvel at the possibilities that nuclear fusion will bring us. The recent breakthrough announced in the US has to be applauded and encouraged, because now it is actually possible to produce more energy from nuclear fusion than is required to create it. News reports liken it to the activity of the sun, which uses nuclear fusion to generate all the energy that it does. The technology is said to be much safer than nuclear fission (which is what conventional nuclear plants use), more environment friendly since it generates less radioactive waste.
This and all the ongoing developments in the field of clean hydrogen present us with a future that is worth investing every last penny in. As I say in my headline, energy could be a function of renewables and new technologies, squared, in an obvious allusion to Einstein’s e=mc².
It is also encouraging that scientists believe the nuclear fusion technology could be brought to market in a couple of decades, when some years ago it was thought to be 50-60 years away. I think governments and investors ought to make this a priority and pursue the research and production with the same focus and zeal that brought coronavirus vaccines to market within a year. Perhaps the couple of decades could be reduced to just one.
If we were to look at government spending on clean energy, the IEA (International Energy Agency) tracks it, and reports that it reached US $ 1.2 trillion since the start of the pandemic in 2020. This includes what governments are spending to make fuels affordable for consumers, especially during the Ukraine crisis, which I think is a flawed use of government subsidy. What’s more, the agency says that 95% of the spending comes from advanced countries, with the US accounting for half of it, while Europe accounts for 37%. This can’t be very encouraging news, when it is the emerging and developing countries that need to make the transition to clean energy faster, as they have a lot of catching up to do.
According to the IEA again, coal production and consumption has also spiked in recent years, and India and China account for most of it. As we saw from the growth in fossil fuel consumption chart from Our World in Data, in the case of India and China, most of the rise in fossil fuel consumption is probably coming from the dirtiest and cheapest of the fuels, coal.
Considering all this, it is quite clear to me that our global energy crisis is not going to get resolved by diversifying supply of the same old fossil fuels. It might be a stop-gap solution, but as renewables have already shone the way, it is time to look at innovations and new technologies in fuels and in energy efficiency. And it will take sensible government policies and investment in research as well as private investment to take us to that low fossil-fuel future.